Loral Corp. v. Moyes

• Decision Date: 08 November 1985
• Citation: 174 Cal.App.3d 268,219 Cal.Rptr. 836
• Court: California Court of Appeals Court of Appeals
• Parties: , 1986-1 Trade Cases P 66,926 LORAL CORPORATION, etc., et al., Plaintiffs, Appellants and Cross-Appellees, v. Robert M. MOYES, Defendant and Cross-Appellant. A021856.

Page 836

219 Cal.Rptr. 836

174 Cal.App.3d 268, 1986-1 Trade Cases P 66,926

LORAL CORPORATION, etc., et al., Plaintiffs, Appellants and Cross-Appellees, v. Robert M. MOYES, Defendant and Cross-Appellant.

A021856.

Court of Appeal, Sixth District, California.

Nov. 8, 1985.

Certified for Partial Publication. ^*

Leff & Mason, Robert R. Thornton, Beverly Hills, for plaintiffs, appellants and cross-appellees.

Michael L. Harrison, Thomas R. Berthold, Harrison & Kaylor, San Jose, for defendant and cross-appellant.

AGLIANO, Acting Presiding Justice.

The primary question in this proceeding is the validity of a termination agreement between an employer and its former employee which, inter alia, restrains the former employee from disrupting, damaging, impairing or interfering with his former employer's business by "raiding" its employees. Plaintiff Loral Corporation and its subsidiary, Conic Corporation, brought this action against its former executive officer, Robert Moyes, claiming Moyes breached the agreement by inducing employees of plaintiff to work for Moyes' subsequent employer, Aydin Corporation.

The trial court granted judgment of nonsuit on August 26, 1981, after plaintiffs' opening statement as to this cause of action on the ground the restriction against hiring away the plaintiff's employees was an unlawful restraint of competition, stating "the contract in its entirety is null and void ab initio."

The court also determined, contrary to Moyes' contention, that the termination agreement had not been induced by the employer's fraud.

We will reverse the judgment of nonsuit on the employer's action for breach of contract and remand the matter for trial and/or further proceedings on these and subsidiary issues.

I The Appeal

A. Review of Grant of Motion for Nonsuit

A motion for nonsuit is authorized by Code of Civil Procedure section 581c. ¹ The motion is tantamount to a demurrer to the evidence (Archibald Estate v. Matteson (1907) 5 Cal.App. 441, 445, 90 P. 723; Reaugh v. Cudahy Packing Co. (1922) 189 Cal. 335, 339, 208 P. 125) by which a defendant can test the sufficiency of the plaintiff's case before presenting his or her own. (Carson v. Facilities Development Co. (1984) 36 Cal.3d 830, 838, 206 Cal.Rptr. 136, 686 P.2d 656.) It presents a question of law (Archibald Estate, supra, 5 Cal.App. at p. 445, 90 P. 723, and cases there cited; Reaugh, supra, 189 Cal. at p. 339, 208 P. 125), namely, whether the evidence offered in support of plaintiff's case could justify a judgment for plaintiff. (Cf. Ringgold v. Haven (1850) 1 Cal. 108, 114, 116; Carson v. Facilities Development Co., supra, 36 Cal.3d at p. 838, 206 Cal.Rptr. 136, 686 P.2d 656.) On appeal we are required to evaluate the plaintiff's evidence under the same rules governing the trial court. (Id., at pp. 838-839, 206 Cal.Rptr. 136, 686 P.2d 656.) The evidence most favorable to the plaintiff must be accepted as true unless it is inherently incredible (Nicholas v. Jacobson (1931) 113 Cal.App. 382, 387-388, 298 P. 505), and conflicts must be resolved and reasonable inferences drawn in the plaintiff's favor. (Estate of Arnold (1905) 147 Cal. 583, 586, 82 P. 252; Carson, supra, 36 Cal.3d at pp. 838-839, 206 Cal.Rptr. 136, 686 P.2d 656.)

When a nonsuit is based on the plaintiff's opening statement, we assume plaintiff can prove all the favorable facts alleged. (Cf. Moffitt v. Ford Motor Co. (1931) 117 Cal.App. 247, 250, 3 P.2d 605; Smith v. Roach (1975) 53 Cal.App.3d 893, 897-898, 126 Cal.Rptr. 29, and cases there cited.) The court may consider as part of the opening statement exhibits that would probably become evidence at trial. (John Norton Farms, Inc. v. Todagco (1981) 124 Cal.App.3d 149, 162-163, 177 Cal.Rptr. 215.) A nonsuit on the opening statement is proper only when the court concludes that there will be no evidence which would support a judgment in favor of the plaintiff. (Willis v. Gordon (1978) 20 Cal.3d 629, 633, 143 Cal.Rptr. 723, 574 P.2d 794; John Norton Farms, Inc. v. Todagco, supra, 124 Cal.App.3d 149, 160, 177 Cal.Rptr. 215, and cases there cited.)

The grounds for the nonsuit motion should be clearly specified to give the plaintiff an opportunity to cure any defects. (People v. Banvard (1865) 27 Cal. 470, 474; Daley v. Russ (1890) 86 Cal. 114, 117, 24 P. 867; Timmsen v. Forest E. Olson, Inc. (1970) 6 Cal.App.3d 860, 868, 86 Cal.Rptr. 359.) The plaintiff must be given an opportunity to present all the facts he expects to prove before a nonsuit is proper. (Paul v. Layne & Bowler Corp. (1937) 9 Cal.2d 561, 566, 71 P.2d 817; Huang v. Garner (1984) 157 Cal.App.3d 404, 416-418, 203 Cal.Rptr. 800, and cases there cited.) On appeal we will not consider any ground for the nonsuit not advanced in the trial court, except one which identifies an incurable defect. (Lawless v. Calaway (1944) 24 Cal.2d 81, 92-94, 147 P.2d 604.)

B. The Opening Statement

Plaintiffs' opening statement proffered the following facts. Robert Moyes was employed by the TerraCom Division of Conic as its manager in 1970; his title was later changed to president. He also became a member of Conic's Board of Directors. TerraCom was an electronics manufacturer with approximately 100 employees which sought to develop a commercial digital microwave radio.

Moyes' termination was accompanied by a handwritten agreement of March 29, 1979, and a typed agreement of May 4, 1979, the latter of which stated:

"1. You have resigned as President of the Terracom Division and as a Director of Conic Corporation, effective at the close of business March 29, 1979, and you hereby resign as an employee as of the close of business May 11, 1979.

"2. Your salary and fringe benefits will continue through September 3, 1979 and, if you are then unemployed, salary and fringes will continue thereafter until you become employed but not beyond March 29, 1980. Your existing deferred compensation arrangements will continue unaffected, but no such arrangements shall be made with respect to any salary which may be paid to you for any part of calendar 1980.

"3. You will receive a bonus for fiscal year 1979, as though you were still employed, and whatever vacation pay may be accrued as of May 11, 1979.

"4. Pursuant to the forfeiture provisions of Article VII of Loral's 1976 Stock Option Plan, you hereby resell all shares of Loral common stock obtained on the exercise of special options under the 1976 Stock Option Plan, (except for the 600 shares as to which restrictions have lapsed), amounting to 4400 shares at $5 per share.

"5. All your outstanding unexercised stock options, except for an option granted January 29, 1975, under the Company's 1971 Stock Option Plan as to which 625 option shares remain unexercised, are hereby cancelled.

"6. In addition to the payments already provided for, you will be paid $57,000 in six quarterly installments of $8,000, through September 30, 1980 with a final payment of $9,000 on December 31, 1980.

"7. As a condition for the foregoing payments, you will preserve the confidentiality of all trade secrets and other confidential information of Loral Corporation, Conic Corporation, and its TerraCom Division and you will not now or in the future disrupt, damage, impair or interfere with the business of Conic Corporation, or its TerraCom Division whether by way of interfering with or raiding its employees, disrupting its relationships with customers, agents, representatives or vendors or otherwise. You are not however, restricted from being employed by or engaged in a competing business."

Moyes subsequently became employed by Aydin Corporation. He had been negotiating with Aydin Corporation since February 1979, and received a job offer on March 29, 1979. He accepted and became the president of its microwave division. He then breached the agreement by offering employment with his new employer to two key TerraCom employees, defendants Bruce Jennings and Larry Janssen. Janssen received a job offer from Moyes while he was employed as director of production at TerraCom and he went to work for Aydin soon after Moyes became president. Jennings left his position as executive vice-president of TerraCom, and within a week was interviewed by Moyes at Aydin. On October 1, 1979, Jennings became a marketing manager for Aydin. TerraCom investigated and determined that a large number of their key employees had interviewed with Moyes and been offered jobs at Aydin. Ultimately a large number of people left TerraCom and it spent over $400,000 recruiting new employees. TerraCom's performance on a project to deliver a microwave radio was impaired by the departure of Moyes and other personnel. ²

C. The Nonsuit Judgment Must Be Reversed

Defendant's major contention in support of the trial court's decision is that the termination agreement is void under Business and Professions Code section 16600: "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." California courts have apparently not addressed the application of this statute to a former employee's agreement not to disrupt, damage, impair or interfere with his former employer by "raiding" its work-staff, in other words, a noninterference agreement.

Defendant's contention requires that we consider this statute and this contract in relationship to the tort law of the marketplace, which would otherwise regulate Moyes' conduct. Generally the law of unfair competition prohibits former employees from disclosing or misusing an employer's trade secrets and confidential information--even in the absence of contractual restrictions. (Empire Steam Laundry v. Lozier (1913) 165 Cal. 95, 99, 130 P. 1180.) Moreover, an agreement between employer and employee defining a trade secret may not be decisive in determining whether the court will so regard it. (State Farm Mut. etc. Ins. Co. v. Dempster (1959) 174 Cal.App.2d 418, 426, 344...