DePuy Synthes Sales, Inc. v. Howmedica Osteonics Corp., No. 21-55126 (9th Cir. 2022)
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The Ninth Circuit affirmed the district court's order denying transfer under 28 U.S.C. 1404(a) and affirmed the grant of partial summary judgment to DePuy and Plaintiff Waber. Waber was hired by HOC and signed an employment contract with HOC's parent company, Stryker, which included restrictive one-year non-compete clause and forum-selection and choice-of-law clauses requiring adjudication of contract disputes in New Jersey.
The panel concluded that, as the actual employer that participated in the proceedings to enforce its parent corporation’s forum-selection clause, HOC has a right to appeal the adverse decision of the district court on that issue. Furthermore, HOC properly became a party to this litigation in the district court case, albeit after the district court denied the motion to transfer. Accordingly, the panel has jurisdiction to hear HOC's appeal under 28 U.S.C. 1201. The panel held that the state law applicable here, Cal. Labor Code 925(b), which grants employees the option to void a forum-selection clause under a limited set of circumstances, determined the threshold question of whether Waber's contract contained a valid forum-selection clause. In this case, Waber satisfied all the prerequisites of section 925 and effectively voided the forum-selection clause under section 925(b). Finally, HOC presents no persuasive reason for the panel to overturn the district court's ruling of partial summary judgment in favor of DePuy and Waber that the forum-selection, non-compete and non-solicitation clauses were void under California law.
Court Description: Forum-Selection Clause / Transfer. The panel affirmed the district court’s order denying transfer under 28 U.S.C. § 1404(a); and affirmed the grant of partial summary judgment to DePuy Synthes Sales, Inc. and Jonathan Waber because the district court did not err in holding the forum-selection, non-compete and non- solicitation clauses in an employment contract void under California law. Waber was hired by Howmedica Osteonics Corp., and signed an employment contract with Howmedica’s parent company, Stryker Corporation. The contract included a restrictive one-year non-compete clause and forum-selection and choice-of-law clauses requiring adjudication of contract disputes in New Jersey. Waber left Stryker to work at DePuy, a Howmedica competitor. The panel first addressed the threshold jurisdictional issue. Howmedica was not a party to the case when Stryker’s motion to dismiss or transfer was decided. The * The Honorable Richard Linn, United States Circuit Judge for the U.S. Court of Appeals for the Federal Circuit, sitting by designation. DEPUY SYNTHES SALES V. HOWMEDICA OSTEONICS 3 panel held that as the actual employer that participated in the proceedings to enforce its parent corporation’s forum- selection clause, Howmedica had a right to appeal the adverse decision of the district court on that issue. Moreover, Howmedica properly became a party to this litigation in the district court case, albeit after the district court denied the motion to transfer. The panel concluded there was jurisdiction to hear Howmedica’s appeal under 28 U.S.C. § 1201. The panel considered whether federal or state law governed the validity of a forum-selection clause. The panel held that the state law applicable here, Cal. Labor Code § 925(b), which grants employees the option to void a forum-selection clause under a limited set of circumstances, determined the question of whether Waber’s contract contained a valid forum-selection clause. Section 925 as applied by the district court here is not a rule of state law that removed all discretion from a federal court on questions of venue. Rather, the provisions in § 925 circumscribing the kinds of employment agreements permitted and allowing parties unrepresented by counsel to void a forum-selection cause under certain circumstances relate to the terms of the agreement between the parties and, at least to that extent, are contrary to or within the scope of 28 U.S.C. § 1404(a). Waber’s voiding of the forum-selection clause in his employment contract under § 925(b) excised the forum- selection clause from the agreement as presented to the district court. The panel held that § 1404(a) and Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988), did not broadly preempt all state laws controlling how parties may agree to or void a forum-selection clause. Having found that Waber satisfied all the prerequisites of § 925 and effectively voided the forum-selection clause 4 DEPUY SYNTHES SALES V. HOWMEDICA OSTEONICS under § 925(b), the district court turned to the traditional § 1404 factors under M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12–13 (1972), and held they favored denial of transfer. The panel held there was no error in applying the California choice-of-law rules here where there was no valid forum-selection clause. The panel rejected Howmedica’s challenges. There was no error in the district court’s consideration of § 925 as part of its transfer analysis. Howmedica was incorrect when it asserted that Bremen was inapplicable to adjudication of § 1404(a) motions because Stewart limited Bremen to the context of forum non conveniens rather than transfer. Finally, the district court did not abuse its discretion in finding that the forum-selection clause was void and unenforceable and that the modified Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, 571 U.S. 49, 62 n.5 (2013), analysis was thus inapplicable. The panel found no reason to question or overturn the district court’s analysis or its denial of Howmedica’s motion to transfer. The panel held that Howmedica presented no persuasive reason to overturn the district court’s ruling of partial summary judgment in favor of DePuy and Waber that the forum-selection, non-compete and non-solicitation clauses were void under California law.
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