Amn Healthcare, Inc. v. Aya Healthcare Servs., Inc.

• Citation: 28 Cal.App.5th 923,239 Cal.Rptr.3d 577
• Decision Date: 01 November 2018
• Docket Number: D071924
• Court: California Court of Appeals
• Parties: AMN HEALTHCARE, INC., Plaintiff, Cross-Defendant, and Appellant, v. AYA HEALTHCARE SERVICES, INC. et al., Defendants, Cross-Complainants, and Respondents.

28 Cal.App.5th 923

239 Cal.Rptr.3d 577

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 District, Division 1, California.

Filed November 1, 2018

DLA Piper and Stanley J. Panikowski, for Plaintiff, Cross-defendant, and Appellant.

Solomon Ward Seidenwurm & Smith, William V. Whelan, San Diego, Mei-Yin M. Imanaka and Deborah A. Yates, for Defendants, Cross-complainants, and Respondents.

BENKE, J.

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 its nonsolicitation of employee provision against individual defendants and its other former employees; and (3) the award of attorney fees in favor of defendants.

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, Civil Code sections 3426 et seq . (UTSA). Defendants filed a cross-complaint for declaratory relief and unfair business competition.

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 Business and Professions Code 2

section 16600; that as such, AMN's contract-based causes of action failed as a matter of law; and that AMN's tort-based causes of action also failed as a matter of law because the information allegedly used by defendants to recruit travel nurses was not protected.

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.

As we explain, we independently conclude the court properly granted summary judgment of AMN's operative complaint and of defendants' declaratory relief cause of action in their cross-complaint. We further conclude the court properly exercised its discretion when it enjoined AMN from attempting to enforce its nonsolicitation of employee provision with respect to its former employees, including individual defendants, and when it awarded defendants their reasonable 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 of the Company or the Company Affiliates, financial data, including price and cost objectives, quoting policies and procedures (collectively, ‘Confidential Information’) and that these are confidential trade secrets and constitute valuable and unique assets of the Company and the Company Affiliates, (ii) during the course of Employee's employment with the Company, Employee has had and will continue to have access to the Confidential Information of the Company or the Company Affiliates or both, and (iii) prior to the commencement of Employee's employment, the Company and the Company Affiliates have established valuable business relationships and substantial goodwill with their customers based on, among other things, their use of their Confidential Information. The Confidential Information excludes only information that has been made public through no fault of Employee or any of Employee's representatives." (Italics added.)

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 one year a former AMN employee from recruiting a travel nurse who was on temporary assignment for AMN. (Ibid .)

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 ...