Covenants Not To Compete – Fourth DCA Considers A New Fine Question (Or Two)


I’ve written many times about Section 16600 of California’s Business & Professions Code which, with limited exceptions, voids covenants not to compete.  See TRO Issued Enjoining Breach Of Non-Compete Agreement Clauses, No Surprises Here – California Court Won’t Enforce Non-Compete, Court Says “No Way” To No-Hire, and California’s Hostility To Non-Compete Agreements Does Not Vitiate Forum Selection ClauseNow, we have a new wrinkle – what is the effect, if any, of Section 16600 on an employee or officer’s conduct and duty while employed?

Angelica Textile Services, Inc. v. Park, 2013 Cal. App. LEXIS 818 (Cal. App. 4th Dist. Oct. 15, 2013) involved a suit by a laundry business against a new competitor and one of its former employees, alleging, among other things, violation of the Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq.  In addition to the UTSA claim, the plaintiff asserted claims for unfair competition, interference with business relationships, breach of contract, conversion and breach of fiduciary duty.  The trial court ruled that all of the non-UTSA claims were displaced by the UTSA.  Then, a jury ruled that no trade secrets had been misappropriated.

On appeal, the plaintiff did not challenge the jury’s verdict, but did argue that its non-UTSA claims should not have been dismissed.  In an opinion by Justice Patricia D. Benke, the Fourth District Court of Appeal reversed.  In particular, the Court found that Section 16600 does not affect the conduct and duties of an employee or officer while employed.  The Court also found that even though documents taken by an employee contained no trade secrets, the employee might still be liable for conversion.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins | Attorney Advertising

Written by:


Allen Matkins on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.