AMN HEALTHCARE, INC., Plaintiff, Cross-defendant, and Appellant, v. AYA HEALTHCARE SERVICES, INC. et al., Defendants, Cross-complainants, and Respondents.
D071924
COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA
Filed 11/1/18
(Super. Ct. No. 37-2015-00033229-CU-BT-CTL)
CERTIFIED FOR PUBLICATION
APPEAL from a judgment of the Superior Court of San Diego County, Joel M. Pressman, Judge. Affirmed.
Solomon Ward Seidenwurm & Smith, William V. Whelan, Mei-Yin M. Imanaka and Deborah A. Yates, for Defendants, Cross-complainants, and Respondents.
Plaintiff AMN Healthcare, Inc. (AMN) appeals (1) the judgment in favor of defendants Kylie Stein, Robin Wallace, Katherine Hernandez, Alexis Ogilvie (sometimes collectively, individual defendants) and Aya Healthcare, Inc. (Aya) (sometimes individual defendants and Aya are collectively referred to as defendants); (2) the injunction preventing AMN from enforcing
AMN and Aya are competitors in the business of providing on a temporary basis healthcare professionals, in particular “travel nurses,” to medical care facilities throughout the country. Individual defendants were former “travel nurse recruiters” of AMN who, for different reasons and at different times, left AMN and joined Aya, where they also worked as travel nurse recruiters.
As a condition of employment with AMN, individual defendants each signed a Confidentiality and Non-Disclosure Agreement (CNDA), which, as discussed post, included a provision preventing individual defendants from soliciting any employee of AMN to leave the service of AMN for at least a one-year period.1 Significant in the instant case, a travel nurse was deemed to be an employee of AMN while on temporary assignment through AMN.
AMN sued defendants, asserting various causes of action including breach of contract and misappropriation of confidential information, including trade secrets as set forth in the Uniform Trade Secrets Act,
Defendants moved for summary judgment of AMN‘s operative complaint and of their own cross-complaint. Defendants claimed that the nonsolicitation of employee provision in the CNDA was an improper restraint on individual defendants’ ability to engage in their profession, in violation of
The trial court agreed with defendants, granted summary judgment against AMN, and granted summary adjudication of defendants’ declaratory relief cause of action in their cross-complaint. After granting such relief, the court subsequently enjoined AMN from enforcing the nonsolicitation of employee provision in the CNDA as to any former (California) AMN employee and awarded defendants attorney fees.
FACTUAL AND PROCEDURAL OVERVIEW
Operative Complaint
In its first amended complaint (FAC), AMN alleged that it provided “staffing services,” including through its “Travel Nurse Staffing department,” which recruited “traveling nurses (‘Travelers‘) and place[d] them as [AMN] employees, on thirteen-week assignments with hospitals and other healthcare organizations throughout the United States” (¶ 16); and that, in addition to placing travel nurses on new assignments, AMN also extended assignments for its nurses for additional 13-week periods. (Ibid.)
Between October 2012 and May 2014, AMN hired individual defendants to work in its travel nurse staffing department to recruit and place travel nurses. (¶ 17.) AMN alleged that individual defendants received AMN‘s “trade secrets, intellectual property, and confidential and proprietary information, which the Individual Defendants used in performing their job duties.” (¶ 18.)
As a condition of employment, individual defendants each signed the CNDA, which were attached as exhibits to the FAC. (¶ 19.) Section 1.2 of the CNDA defined “confidential information” as follows: “Employee acknowledges and agrees that (i) the Company and the Company Affiliates have spent considerable time, effort and money to develop and implement their respective customer lists, financial information, business methods, contracts and contractual relations with the Company‘s (or the Company Affiliates, as applicable) current or prospective customers, healthcare professionals and prospective healthcare professionals[‘] names and information, leads and account information, mailing lists, computer programs, advertising campaigns (including, without limitation, displays, drawings, memoranda, designs, styles or devices), marketing, promotional and pricing information, employee names, compensation and benefit information, business prospects, pricing methods, pricing concepts, internal business procedures and business plans, including analytical methods and procedures, financial information, service and operation manuals, documentation, ideas for new products and services, customer and marketing information materials, marketing and development plans, forecasts and forecast assumptions, future plans and potential strategies
Section 2 of the CNDA set forth the obligations of AMN employees not to disclose AMN‘s “confidential information” both during and after employment with AMN: “In order to protect the Confidential Information of the Company and the Company Affiliates and to promote and ensure the continuity of the relationships of the Company and the Company Affiliates with their customers, healthcare professionals, agents, brokers, Employee covenants and agrees that Employee will not at any time while Employee is employed by the Company in any capacity (whether pursuant to this Agreement or otherwise), or at any time subsequent to Employee‘s employment with the Company, (i) divulge, publish, disclose, or communicate, in any fashion, form or manner, either directly or indirectly, Confidential Information of the Company or any Company Affiliate to any person, firm, corporation, partnership, association or other entity, or (ii) otherwise directly or indirectly use any Confidential Information for Employee‘s own benefit or to the detriment of the Company or any Company Affiliate, except that none of the provisions set forth in this Section 2 shall apply to disclosures made to other employees or to officers or directors of the Company or any Company Affiliate, which are made for valid business purposes, at the direction and with the permission of the Company, in connection with the performance by Employee of Employee‘s duties and responsibilities hereunder.”
As noted, the CNDA also included a nonsolicitation of employee provision, section 3.2. It provided: “Employee covenants and agrees that during Employee‘s employment with the Company and for a period of [one year or] eighteen months after the termination of the employment relationship with the Company, Employee shall not directly or indirectly solicit or induce, or cause others to solicit or induce, any employee of the Company or any Company Affiliate to leave the service of the Company or such Company Affiliate.” (¶ 22.) Because AMN‘s travel nurses were employees of AMN, the FAC alleged section 3.2 applied to prevent for a period of at least
On or about June 22, 2015, defendant Stein resigned from her employment with AMN and accepted a position with Aya. The FAC alleged that while an AMN employee, Stein had been working to extend the assignments of two AMN travel nurses, Brandon Morris and Jamie Meyer; that at or near her resignation with AMN, “Stein solicited or induced Morris and Meyer to leave” AMN‘s employment and become employees of Aya; that in order to do so, Stein used “confidential and proprietary information” regarding the identities of these two individuals, including the terms and conditions of their employment with AMN (¶ 24); and that Morris and Meyer accepted employment with Aya, which extended their existing assignments, in July and August 2015, respectively. (¶ 25.)
On September 9, 2015, Wallace resigned from AMN and began working for Aya. The FAC alleged that before she resigned, Wallace accessed without AMN‘s approval “a confidential and proprietary document containing information regarding the Travelers that Wallace had placed on assignment through [AMN].” (¶ 26.) Wallace then e-mailed this document to her personal e-mail address for use after her resignation with AMN. The FAC further alleged that Wallace on the same day forwarded to an Aya recruiter a confidential and proprietary e-mail sent by AMN senior manager Theresa Wilhelm. The Wilhelm e-mail “contained information regarding Aya,” including outlining a strategy for “competing with Aya.” (¶ 27.) AMN alleged both documents forwarded by Wallace contained confidential information as defined in section 1.2 of the CNDA, including trade secrets. (¶ 28.)
On or about June 25, 2015, Hernandez resigned from AMN and joined Aya. Before her resignation, Hernandez worked with AMN travel nurse Kym Shay. While employed by Aya, the FAC alleged Hernandez “offered to perform recruiting services for Shay and thereby solicited or induced Shay to leave [AMN‘s] employment and become an employee of Aya.” (¶ 29.)
The FAC alleged that Ogilvie resigned from AMN on or about November 2015 and joined Aya; that during her employment with AMN, Ogilvie had worked with travel nurse Sarah Hennis; and that while employed by Aya, Ogilvie recruited Hennis to leave AMN and join Aya. (¶ 30.)
Plaintiff‘s FAC asserted 11 causes of action, seeking general and punitive damages and injunctive relief. The first cause of action for breach of contract against individual defendants alleged Stein, Hernandez, and Ogilvie breached the CNDA by soliciting AMN travel nurses to leave AMN and become
AMN‘s second cause of action for misappropriation of trade secrets, against Stein, Wallace, and Aya, alleged Stein misappropriated AMN‘s trade secrets — the identity of AMN travel nurses and the terms and conditions of their employment with AMN — by inter alia soliciting Morris and Meyer to leave AMN and join Aya (¶ 45); that Wallace misappropriated a document containing AMN trade secrets regarding AMN travel nurses she had placed on assignment while an AMN employee; and that Wallace and Aya misappropriated the Wilhelm e-mail containing trade secrets of AMN outlining a strategy to compete with Aya. (¶ 45.)
AMN‘s third cause of action against Wallace only alleged that she owed AMN a tort-based duty of loyalty as a result of her execution of the CNDA and her employment with AMN, and that she breached that duty by misappropriating AMN‘s “confidential and proprietary information — other than [AMN‘s] trade secrets — for the purpose of accessing and using such information to compete with [AMN].” (¶ 51.)
AMN‘s fourth and fifth causes of action for intentional and negligent interference with prospective economic advantage, respectively, alleged that defendants knew, or should have known, of AMN‘s relationships with its travel nurses (¶¶ 56 & 62); that defendants engaged in conduct with the intent to disrupt, or failed to act with reasonable care to avoid disrupting, such relationships by using AMN‘s “confidential and proprietary information[] other than [AMN‘s] trade secrets” (¶¶, 57 & 63); and that defendants’ conduct was a substantial factor in disrupting such relationships. (¶¶ 58-59 & 65.)
AMN‘s sixth, seventh, eighth, ninth, and tenth causes of action, against Aya only, respectively alleged Aya intentionally interfered with AMN‘s contractual relationships with individual defendants; conspired with Wallace to misappropriate AMN‘s trade secrets; conspired with Wallace to breach her duty of loyalty to AMN; aided and abetted Wallace in the misappropriation of AMN trade secrets; and aided and abetted Wallace in breaching her duty of loyalty to AMN. (¶¶ 66–86.)
Plaintiff‘s eleventh cause of action against defendants alleged that the acts of Wallace in breaching her duty of loyalty to AMN, and of defendants in interfering with AMN‘s business relationships with its travel nurses, constituted unlawful and unfair business practices within the meaning of
Summary Judgment/Adjudication
In support of summary judgment, defendants argued section 3.2 of the CNDA was an unenforceable restraint on trade under
Defendants also argued that AMN‘s third, fourth, fifth, sixth, eighth, and tenth causes of action failed as a matter of law because there were no underlying, independent wrongful acts accompanying these alleged interference-based causes of action, which generally alleged “tortious interference, breaches of a ‘duty of loyalty’ by Ms. Wallace, and a generic unfair competition claim.” Defendants further argued that there was no liability merely because Aya extended job offers to individual defendants who were all at-will employees of AMN; that individual defendants in turn had the right to recruit, and Aya to hire, travel nurses who had formerly worked for AMN and/or were on assignment, albeit temporarily, with AMN; and that AMN‘s theory that defendants engaged in wrongful conduct in their recruiting efforts by “using or relying on [‘]confidential information[‘] ‘other than’ AMN‘s trade secrets” failed as a matter of law because the use of such information was legally permitted in California so long as the information was not a protected trade secret.
Finally, regarding the second cause of action for misappropriation of a trade secret, and the seventh and ninth causes of action for conspiring and aiding and abetting such misappropriation, respectively, defendants argued that the information allegedly at issue was not a trade secret because such information was not private; and that, in any event, there was no evidence to show any such information had been misappropriated or used by defendants.
Opposition to Summary Judgment/Adjudication
AMN argued the nonsolicitation of employee provision in its CNDA was valid and enforceable as it merely prohibited individual defendants from soliciting “current [AMN] employees,” namely, travel nurses on temporary assignment with AMN. It also argued at a minimum triable issues of material fact existed regarding whether defendants misappropriated AMN‘s trade secrets.
AMN argued that because it functioned as an “employment agency,” the “names, addresses, and identities of its Travelers . . . [were] trade secrets per se by statute,” citing to
Court‘s Ruling
After ruling on various objections to the evidence made by the parties, hearing oral argument, and revisiting the evidence, as noted the court granted summary judgment against AMN and summary adjudication in favor of defendants on their declaratory relief cause of action in their cross-complaint. The court ruled the nonsolicitation of employee provision was an unlawful restraint on trade in violation of
Finally, the court found no evidence of misappropriation, noting “[w]hen the court digs into the weeds as to each individual defendant, the evidence does not show that the defendants misappropriated trade secrets. After taking the matter under submission, the Court reviewed the evidence with respect to Wallace allegedly forwarding to Meghan Murphy, a recruiting manager for Aya, an email from Theresa [Wilhelm]. The Court has sustained an objection based on foundation . . . . But even if admissible, the email does not establish a trade secret.”3
DISCUSSION
I
Summary Judgment Was Properly Granted
A. Summary Judgment Standard
“Summary judgment and summary adjudication provide courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute. [Citations.] A defendant moving for summary judgment or summary adjudication may demonstrate that the plaintiff‘s cause of action has no merit
Generally, “the party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact . . . .” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) In moving for summary judgment, “all that the defendant need do is to show that the plaintiff cannot establish at least one element of the cause of action—for example, that the plaintiff cannot prove element X.” (Id. at p. 853.)
“After the defendant meets its threshold burden [to demonstrate that a cause of action has no merit], the burden shifts to the plaintiff to present evidence showing that a triable issue of one or more material facts exists as to that cause of action or affirmative defense. [Citations.] The plaintiff may not simply rely on the allegations of its pleadings but, instead, must set forth the specific facts showing the existence of a triable issue of
material fact. [Citation.] A triable issue of material fact exists if, and only if, the evidence reasonably permits the trier of fact to find the contested fact in favor of the plaintiff in accordance with the applicable standard of proof.” (Collin, supra, 228 Cal.App.4th at p. 588.)
“On appeal, the reviewing court makes ’ “an independent assessment of the correctness of the trial court‘s ruling [regarding summary judgment], applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law.” ’ ” (Hesperia Citizens for Responsible Development v. City of Hesperia (2007) 151 Cal.App.4th 653, 658.) Our task is to determine whether a triable issue of material fact exists. (Collin, supra, 228 Cal.App.4th at p. 588.) In independently examining the record on appeal “to determine whether triable issues of material fact exist” (Ambriz v. Kelegian (2007) 146 Cal.App.4th 1519, 1530), we ” ‘consider[ ] all the evidence set forth in the moving and opposition papers except that to which objections were made and sustained.’ ” (Ibid.) A trial court‘s stated reasons for granting summary judgment are not binding on the reviewing court, “which reviews the trial court‘s ruling, not its rationale. [Citation.]” (Ramalingam v. Thompson (2007) 151 Cal.App.4th 491, 498 (Ramalingam).)
