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socrateaser
socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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Client is suing me for non-compete in NY. I am suing client

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Client is suing me for non-compete in NY. I am suing client in CA over breach of contract and non-compete, so both cases are moving forward. Client has expressed that they would file to stay the action in CA pending NY action. In my answer in NY, should I write up as affirmative defenses the same claims I have made in my complaint in CA? And if I do that, then for sure the CA action and NY actions would overlap? I'm trying to understand the dynamics at play between the cases then, and what would be the consequences of doing so. Would the causes of action be decided in NY then, and thus the CA would be duplicative?
All of these actions seem to be interrelated. I would have brought a motion to dismiss for inconvenient forum (forum non conveniens). The grounds would be (making an assumption) that the work was all performed in California, and there are issues as to whether or not the relationship was one of independent contractor or employee, as well as whether or not Cal. Bus. & Prof. Code 16600 would completely void any noncompete clause. regardless of the choice of law provisions of the contract.

Re affirmative defenses, you must plead everything that you believe is relevant or it's waived. So, if your complaint alleges that the noncompete is void as against you, but not against the NY party, then you would have to plead that in your answer in NY (again, assuming that the NY court doesn't dismiss.

Another approach would be to remove the NY case to federal court (assumes that the amount in controversy is more than $75,000 exclusive of costs and attorney's fees -- and that no defendant is a citizen of California. Then, I would ask the federal district court to transfer the case to the U.S. District Court in California, which would be easier than a straight dismissal.

Federal court judges are better, in my opinion, and the rules of procedure and evidence more consistent.

Hope this helps.
Customer: replied 4 years ago.

I am actually trying to dismiss the action in NY while the action in CA is now in discovery (but defendants in CA might request a motion to stay). I'm not sure I want to be set up as an 'employee' because if I'm a contractor, then the issue of trade secrets might swing my way, since there was no written agreement to the effect of relinquishing any of the work created as 'work for hire' (is this correct?)


 


 


I'm not sure I understood your second paragraph. If the NY action goes forward (survives the motion to dismiss because of FNC), then should I counter sue, which would basically be the same actions that are going on in CA? how does an answer in NY with the same causes of action play against the CA suit? would the OP then have more of a standing to stay the CA action (the NY one is further ahead)?

A work made for hire is relevant to the U.S. Copyright Act Section 101.

Under Cal. Civil Code 3426.1(d), "Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The fact that you are an employee vis-a-vis an independent contractor does not create an obligation on your part to protect the other party's trade secrets. If you didn't promise to maintain the other party's secrets, and that party made no reasonable efforts to keep them secret (e.g., by having you sign an NDA/confidentiality agreement), then your status as an employee or independent contractor will not affect the outcome (in my opinion, of course).

Re the two different cases, it seems to me that if each party allowed the two cases to go forward, then the courts will not stand in the way. Ordinarily, the NY party could have asked for a dismissal in CA, if NY was the first case filed. Apparently, tht didn't happen, so at this point, you're stuck with two cases going forward simultaneously.

You cannot sue in NY for something you have already sued on in CA -- unless you dismiss the CA case first. Same in reverse for the NY party. The frist court to render a judgment or dismissal on the merits would provide the prevailing party with a the tool necessary to dismiss the case in the other jurisdiction as "res judicata" (already decided).

Hope this helps.
Hello again,

I noticed that you never rated this answer. Is there anything else I can do for you concerning this particular question, or are we "all good?"
Customer: replied 4 years ago.

hi,


 


Thanks for the follow up. Actually the reason why I didn't come back to the question is because there's quite a bit of information that I needed to digest and/or elaborate on.


 


Re Trade secrets, yes I did sign a non-compete/confidentiality agreement, with choice of law in NY.


 


We are currently motioning for FNC in NY (oral hearings in one month), so until then it seems the CA action will be 'on hold' depending on whether or not the NY action moves forward or not (obviously a dismissal in NY would greatly improve the strength of action in CA).


 


I guess what I am trying to understand is on your last paragraph:


 


"You cannot sue in NY for something you have already sued on in CA -- unless you dismiss the CA case first. Same in reverse for the NY party. The frist court to render a judgment or dismissal on the merits would provide the prevailing party with a the tool necessary to dismiss the case in the other jurisdiction as "res judicata" (already decided). "


 


By 'you cannot sue' what exactly do you mean? it seems that both actions can run in parallel, and it doesn't seem like they're necessarily 'aware' (to the causes of action) of each other. What would happen if in my answer in NY I made counter claims exactly as the complaint in CA? I understand res adjudicata, but that legal concept merely would mean that if the counter claims in NY were somehow to be decided first then (for better or for worse) then they could be brought to the CA court?

By 'you cannot sue' what exactly do you mean? it seems that both actions can run in parallel, and it doesn't seem like they're necessarily 'aware' (to the causes of action) of each other. What would happen if in my answer in NY I made counter claims exactly as the complaint in CA? I understand res adjudicata, but that legal concept merely would mean that if the counter claims in NY were somehow to be decided first then (for better or for worse) then they could be brought to the CA court?

A: Within the doctrine of res judicata is the principle that a person must bring all of the claims that arise from the same set of transactions or occurrence in the same action or he/she is barred from bringing them in a subsequent action. Ordinarily, when two courts are working on claims which may be barred as res judicata if one court rules first, an attorney for one of the parties will seek to dismiss all but one of the lawsuits and consolidate all claims in one court.

In your case, if you start pleading counterclaims in NY, and NY rules first, then the CA lawsuit could be terminated by presenting the NY judgment in CA court and requesting a dismissal on res judicata grounds. Or visa versa.

Thus my concern. Hopefully your FNC motion will end the NY lawsuit.

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Customer: replied 4 years ago.

Thanks. But specifically to the wording you used, then I "can sue"? and then upon one or the other court deciding on it, it can be dismissed on the other end, is this the correct interpretation?


 


So, the question I have is for instance, if as a defense/counter-suit in NY for the non compete, I bring up the doctrine of 'unclean hands' due to wages that were not paid, it seems that the CA action would have been wasted? in this way, I am 'forced' to bring that 'card' out in NY even if I would prefer to have it sued under CA laws, and thus I am undermining my complaint in CA?

Yes, you can sue, but the case could be dismissed in advance for FNC, exactly as your attorney is apparently attempting. Courts don't like to waste their time or interfere with other courts, if possible. The last thing a judge wants to do is spend taxpayer money, when suddenly a litigant stands up and says, "Your honor, we have a ruling from the sister state of blah-blah, that we believe will require a dismissal in this court on res judicata grounds."

Then the judge reads the order, realizes that there is another case that was pending somwhere else on the same issues, and [if I were the judge] I would tell counsel to pull out your wallet and write a check to the court for $1,000, because I'm finding you in contempt for failing to identify what is clearly a crucial issue of jurisdiction, through which you have wasted this court's time.

Hope this helps.
Customer: replied 4 years ago.

"Yes, you can sue, but the case could be dismissed in advance for FNC, exactly as your attorney is apparently attempting."


 


We're attempting to do a FNC in NY to move it to CA. I think the OP is going to try to do a stay of the CA action pending the resolution of the NY one.


 


so if the FNC motion is not granted, then the CA action would be moot, since I would have to put all the cards in the table in NY as a counter suit to ensure the actions against me are seen in the whole context?


 


 


 

It won't be moot, because you still don't know which case will complete first. But, from a judicial perspective, in either jurisdiction, the judges are each inclined to try to obtain a consensus. I wouldn't be surprised if one judge calls the other and says something like, "Okay, you call it, heads I dismiss, tails you dismiss."

Note: I'm wondering if you would consider rating this Q&A and and opening a new one? I'm workin' for less than minimum wage here, at this point!Cool
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