Monday, November 23, 2009

Second District Issues New UCL Standing Opinion re Claims for Permanent Injunctive Relief: Dowell v. Pacesetter, Inc.

In Dowell v. Pacesetter, Inc., __ Cal. 4th __ (2009), the CAP held that the trial court did not abuse its discretion in denying a demand by plaintiff St. Jude to permanently enjoin a competitor’s (“Biosense”) use of a non-compete clause by way of the UCL. Although the non-compete clauses violated California law, giving rise to a violation of Bus. & Prof. 17200, the Court concluded that imposition of a permanent injunction precluding use of the challenged non-compete clause would impact all affected employees (rather than just the 3 former Biosense employees before the court), and therefore, require satisfaction of standing requirements and certification of a class. See Slip Opinion, at 22-26.

As noted by the CAP, the trial court declined to issue a permanent injunction with respect to the agreements involving two of the individual employee plaintiffs because the noncompete clauses had already expired by the time of the court‘s ruling and any such relief would have been moot. See id., at 24. Based on this fact “[t]he permanent injunction that St. Jude otherwise sought with respect to all agreements used by Biosense in California would unquestionably affect agreements with persons not before the trial court and would involve representative claims or relief on behalf of others.” See id.

The CAP reasoned that St. Jude could not meet 17204 standing requirements because, even if it were assumed litigation costs were sufficient to establish injury in fact requirements under applicable law, St. Jude failed to establish injury in fact beyond those employees who were before the court:
Even if such injuries may arguably have been sufficient were St. Jude merely seeking to obtain a permanent injunction with respect to three employees, St. Jude sought an injunction that went well beyond the agreements with these three individuals. St. Jude never offered to produce evidence that it expended resources in connection with Biosense‘s alleged use of the same or similar agreements with other employees whom St. Jude considered employing.
 See id., at 25.

Thus, in the present context, Section 17204 standing was conditioned on the prospective employer (St. Jude) establishing a showing of injury-in-fact which encompassed prospective employees who arguably would be covered by the permanent injunction that was sought.

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