Metro Traffic Control, Inc. v. Shadow Traffic Network

• Decision Date: 17 February 1994
• Docket Number: No. B064697,B064697
• Citation: 22 Cal.App.4th 853,27 Cal.Rptr.2d 573
• Court: California Court of Appeals Court of Appeals
• Parties: , 1994-1 Trade Cases P 70,527, 30 U.S.P.Q.2d 1684 METRO TRAFFIC CONTROL, INC., Plaintiff and Appellant, v. SHADOW TRAFFIC NETWORK, Defendant and Respondent.

Page 573

27 Cal.Rptr.2d 573

22 Cal.App.4th 853, 1994-1 Trade Cases P 70,527,

30 U.S.P.Q.2d 1684

METRO TRAFFIC CONTROL, INC., Plaintiff and Appellant, v. SHADOW TRAFFIC NETWORK, Defendant and Respondent.

No. B064697.

Court of Appeal, Second District, Division 4, California.

Feb. 17, 1994.

Andrews & Kurth, James B. Hicks, Kathy A. Jorrie, and Brad Kuenning, Los Angeles, for plaintiff and appellant

Latham & Watkins, William C. Bottger, Jr., Hugh Steven Wilson, and Elizabeth A. Meinicke, Los Angeles, for defendant and respondent.

CHARLES S. VOGEL, Associate Justice.

Metro Traffic Control, Inc., appeals (Code Civ.Proc., § 904.1, subd. (f)) from an order denying its request for a preliminary injunction to restrain respondent Shadow Traffic Network from soliciting Metro's employees to violate the noncompete and trade secret clauses of their employment contracts. We affirm and hold that the clauses are unenforceable absent evidence that Metro possesses a protectable trade secret.

FACTUAL BACKGROUND

Metro is engaged in the traffic reporting business, contracting with radio stations to gather and broadcast local traffic information to stations' audiences. In 1990, Metro had a one-year written contract with radio station KFWB to provide traffic reporting services for the Los Angeles area. Unless renewed, the contract terminated on December 13, 1991. The contract includes an acknowledgment by KFWB that Metro's employees have agreed in writing to treat all traffic gathering and reporting procedures as confidential trade secrets of Metro and to not compete with Metro in the traffic reporting business during their employment and for one year following their termination.

In September, KFWB notified Metro it might not renew their contract and began soliciting new proposals for traffic reporting services. In October, representatives of Shadow met with KFWB and, on November 20, entered into a written agreement for Shadow to provide KFWB with traffic reporting services commencing December 13, 1991. Shadow immediately began staffing by transfers within its own organization and extending offers of employment to employees of Metro and other competitors. Shadow transferred three employees from its other locations to Los Angeles and hired 21 more, including Jeff Baugh, Robin Johnson, and Tommy Grskovich from Metro.

Baugh was an air traffic reporter for Metro from January 1989 to December 12, 1991, and worked almost exclusively for KFWB. In November 1991, Bill Gaines, the regional director of operations for Metro, informed him and other employees that KFWB was not renewing its contract with Metro. Even though Gaines assured Baugh of continued employment, Baugh was concerned and entered into an agreement with Shadow to commence employment on December 13.

Robin Johnson was employed from June 1990 to December 12, 1991, as a traffic reporter. On November 22, Gaines informed her that Metro's contract with KFWB would not be renewed. Gaines told her that even though all of her work was performed for KFWB, it was not Metro's intent to fire her. Johnson contacted Shadow, which she understood would be taking over traffic reporting Tommy Grskovich was a managing producer for Metro. He was contacted by Shadow and offered higher wages and elected to terminate his employment and to go to work for Shadow. Shadow contacted and interviewed four other Metro employees regarding potential employment for the KFWB assignment.

at KFWB, to initiate inquiries about employment. On November 26, she reached an agreement to commence employment with Shadow starting December 13. The next day, she gave Gaines notice she would terminate her employment at the end of the Metro/KFWB contract.

Baugh, Johnson, and Grskovich and other Metro employees had written employment agreements. All of Metro's employment contracts were terminable at will at any time by either party and all included noncompete and trade secret clauses. ¹

APPELLANT'S CONTENTIONS

Metro contends the trial court (1) failed to rule on its request to enjoin Shadow from inducing Metro's employees to violate the noncompetition clauses of their employment agreements, and (2) erroneously concluded that there was insufficient evidence that Metro had any legally protected trade secrets.

DISCUSSION

"The law is well settled that the decision to grant a preliminary injunction rests in the

                sound discretion of the trial court.  [Citations.]  ... [p] A trial court will be found to have abused its discretion only when it has ' "exceeded the bounds of reason or contravened the uncontradicted evidence." '  [Citations.]  Further, the burden rests with the party challenging the [order] to make a clear showing of an abuse of discretion.  [Citations.]  [p] [22 Cal.App.4th 858] This court has traditionally held that trial courts should evaluate two interrelated factors when deciding whether or not to issue a preliminary injunction.  The first is the likelihood that the plaintiff will prevail on the merits at trial.  The second is the interim harm that the plaintiff is likely to sustain if the injunction were denied as compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued.  [Citations.]  ... [By] balancing the respective equities of the parties, [the court] concludes that, pending a trial on the merits, the defendant should or that he should not be restrained from exercising the right claimed...."  [Citations.]  (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70, 196 Cal.Rptr. 715, 672 P.2d 121.)   We review this record with these principles in mind
                

TRIAL COURT'S CONSIDERATION OF METRO'S CLAIMS

Metro argues that the trial court failed to consider and rule on its claim that Shadow was inducing Metro's employees to violate their covenants to not compete. The law and the record do not support that contention. The trial court's minute order reads: "Preliminary injunction is denied. The Court finds no legally protected trade secret and no showing of unfair competition." Although this cursory summary does not describe the court's reasoning or analysis, it does indicate it did consider all issues raised by the parties' memoranda, declarations, and oral arguments. Metro clearly characterized Shadow's solicitation of Metro's employees as an act of unfair competition and the court's minute order specifically addressed that reference. During the hearing, the court responded to Metro's comment that "we don't want Shadow calling our people," as follows: "[The court]: ... I'm not aware of any authority that says that employees of one company cannot be contacted by telephone or otherwise and solicited as to employment by someone else." This reference is explicitly directed to Metro's claim that Shadow solicited Metro's employees to violate the noncompete covenants of their employment agreements. Any other construction of what occurred at the hearing simply ignores the record.

Even if the court's summary ruling does not disclose its reasoning, it is not legally deficient. The denial of a preliminary injunction does not require any statement of decision or explanation. The hearing on a preliminary injunction is not the equivalent of a trial, and the court is not obligated to set forth its reasoning. (City of Los Altos v. Barnes (1992) 3 Cal.App.4th 1193, 1198, 5 Cal.Rptr.2d 77.) The trial court's minute order is entitled to a presumption that it is correct and any error must be affirmatively shown. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564, 86 Cal.Rptr. 65, 468 P.2d 193.) Metro has made no showing that the court did not address all of its claims.

Metro's reliance on Cal-Dak Co. v. Sav-On Drugs, Inc. (1953) 40 Cal.2d 492, 254 P.2d 497 is unavailing because that case involved the denial of an injunction solely on the ground that its issuance would violate federal antitrust law, foreclosing any consideration of whether the defendant threatened to continue the acts plaintiff wanted enjoined. Pending the appeal from the denial of the injunction, the federal antitrust law changed so that an injunction could lawfully issue. The Supreme Court reversed and held that the case be remanded to the trial court to pass on the factual matters it could not previously consider. Here, the trial court was not foreclosed for any reason from hearing the motion for a preliminary injunction and, indeed, from the record before us it appears that the trial court considered and ruled on all of Metro's claims. All we are required to do in resolving this appeal is to determine if the trial court abused its discretion in denying the injunction.

MERITS OF METRO'S CLAIMS

Unenforceable Restrictive Covenants

The restrictive covenants of Metro's employment contracts prohibit an employee Business and Professions Code section 16600 provides: "... 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 consistently declared this provision an expression of public policy to ensure that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice. Section 16600 has specifically been held to invalidate employment contracts which prohibit an employee from working for a competitor when the employment has terminated, unless necessary to protect the employer's trade secrets. (Muggill v. Reuben H. Donnelley Corp. (1965) 62 Cal.2d 239, 242, 42 Cal.Rptr. 107, 398 P.2d 147.) The corollary to this proposition is that competitors may solicit another's employees if they do not use unlawful means or engage in acts of unfair competition. In Diodes, Inc. v. Franzen (1968) 260 Cal.App.2d 244, 255, 67 Cal.Rptr. 19, the court held that "no actionable wrong is committed by a competitor who solicits his competitor's employees or who hires away one or more of his competitor's employees who are not under contract, so long as the inducement to leave is not accompanied by...