DePuy Synthes Sales, Inc. v. Howmedica Osteonics Corp.

28 F.4th 956

DEPUY SYNTHES SALES, INC., a Massachusetts corporation; Jonathan L. Waber, an individual, Plaintiffs-Appellees,

v. HOWMEDICA OSTEONICS CORP., Defendant-Appellant,andStryker Corporation, a Michigan corporation, Defendant.

No. 21-55126

United States Court of Appeals, Ninth Circuit.

Argued and Submitted November 18, 2021 Pasadena, California

Filed March 14, 2022

Robert J. Carty, Jr. (argued), Nichols Brar Weitzner & Thomas, LLP, Houston, Texas; Michael D. Wexler, Seyfarth Shaw, LLP, Chicago, Illinois; Robert B. Milligan, Seyfarth Shaw, LLP, Los Angeles, California; John P. Phillips, Seyfarth Shaw, LLP, Houston, Texas; for Defendant-Appellant.

Anthony B. Haller (argued), Blank Rome, LLP, Philadelphia, Pennsylvania; Leigh Ann Buziak, Blank Rome, LLP, Philadelphia, Pennsylvania; Jeffrey Rosenfeld, Blank Rome, LLP, Los Angeles, California; for Plaintiffs-Appellees.

Before: Richard Linn,^** Jay S. Bybee, and Mark J. Bennett, Circuit Judges.

LINN, Circuit Judge:

Howmedica Osteonics Corp. ("HOC") appeals from the denial by the United States District Court for the Central District of California of HOC's motion to transfer this case to the District of New Jersey based on a forum-selection clause in an employment contract between Jonathan L. Waber ("Waber"), a California resident, and HOC's parent company, Stryker Corporation ("Stryker"). HOC also appeals from the district court's ruling that the forum-selection, non-compete and non-solicitation clauses in Waber's contract were void under California law and from the district court's consequent grant of partial summary judgment in favor of DePuy Synthes Sales, Inc. ("DePuy") and Waber. Because the district court did not abuse its discretion in denying transfer under 28 U.S.C. § 1404(a), we affirm the denial of HOC's transfer motion. Because the district court did not err in holding the forum-selection, non-compete and non-solicitation clauses void under California law, we affirm the grant of partial summary judgment.

I

A

In September 2017, Waber was hired by HOC as a Joint Replacement Sales Associate for the Palm Springs and Palm Desert areas and signed an employment contract nominally with HOC's parent, Stryker. That 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.¹

On July 1, 2018, Waber left Stryker to work at DePuy, an HOC competitor, serving the same region he previously serviced for Stryker in apparent violation of the non-compete clause. On July 17, 2018, Stryker threatened enforcement of the non-compete clause and soon thereafter sent Waber a cease-and-desist letter that threatened legal action. On July 23, 2018, Waber sent Stryker a notice stating that he was exercising his right to void the forum-selection and choice-of-law clauses under California Labor Code § 925. That statute forecloses certain contracts with California employees and renders such agreements "voidable by the employee" under specified conditions. The key provisions read:

(a) An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:

(1) Require the employee to adjudicate outside of California a claim arising in California.

(2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.

(b) Any provision of a contract that violates subdivision (a) is voidable by the employee , and if a provision is rendered void at the request of the employee, the matter shall be adjudicated in California and California law shall govern the dispute.

...

(e) This section shall not apply to a contract with an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.

Cal. Lab. Code § 925 (emphasis added).

B

Having purported to void the forum-selection and choice-of-law clauses, DePuy and Waber, through shared counsel, filed a preemptive declaratory judgment action in the United States District Court for the Central District of California, seeking a ruling that the forum-selection and choice-of-law clauses were void under § 925, that California law governs the dispute, that the non-compete clause was void as a violation of California Business and Professions Code § 16600,² and that DePuy was not subject to a tortious interference claim. In response, Stryker, seeking to enforce the forum-selection clause, filed a motion to dismiss under 28 U.S.C. § 1406 or to transfer to the United States District Court for the District of New Jersey under § 1404(a).

In addressing Stryker's motion, the district court, guided by M/S Bremen v. Zapata Off-Shore Co. , 407 U.S. 1, 12–13, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (" Bremen") and Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas , 571 U.S. 49, 62 n.5, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013), began by considering whether there was a contractually valid forum-selection clause in Waber's contract. To answer that question, the district court turned to California state law, specifically § 925. Because Waber satisfied all the prerequisites in § 925, the district court concluded that the forum-selection clause "shall not be enforced" under state law. Having found the forum-selection clause unenforceable, the district court applied the factors normally considered by courts in deciding transfer motions under § 1404(a) and found both the private factors—including the Plaintiff's choice of forum and the convenience to the parties—and the public factors—including familiarity with governing law and California's local interest manifest in its strong public policy against enforcing out-of-state forum-selection clauses as reflected in § 925—to weigh against transfer. The district court therefore denied Stryker's motion.

Thereafter, DePuy added HOC as a defendant and amended the complaint, repeating the allegations of invalidity of the forum-selection, choice-of-law, and non-compete clauses, deleting the request for relief from the tortious interference claim, and requesting injunctive relief and attorney fees. The district court followed much of the same reasoning it relied on in its denial of HOC's motion to transfer or dismiss and held that § 925 rendered the forum-selection and choice-of-law clauses "void and unenforceable." Applying California law, the district court granted partial summary judgment in favor of DePuy and Waber, holding that § 925 and § 16600 rendered the forum-selection, non-compete and non-solicitation clauses in Waber's contract void and unenforceable. The only issue of material fact left undecided was whether Stryker and HOC were joint employers.

The parties then filed a joint stipulation that dismissed Stryker with prejudice as the wrong party, agreeing that this would not prejudice HOC's and Stryker's rights to appeal. That resolved the final fact issue. The district court thereafter entered final judgment in favor of DePuy and Waber. HOC appealed both the order denying transfer and the judgment.

II

A

We first address the threshold question of our jurisdiction over this appeal. DePuy notes that HOC was not a party to the case on February 5, 2019, when Stryker's Motion to Dismiss or Transfer was decided and that based on the stipulation entered into by the parties, Stryker has since been dismissed from the case. While DePuy "takes no position for or against jurisdiction here" pursuant to the parties' stipulation, we are obligated to consider our own jurisdiction independently of the parties' stipulation. See Bank of N.Y. Mellon v. Watt , 867 F.3d 1155, 1157 (9th Cir. 2017).

It is uncontested that HOC participated in the litigation and filed its notice of appearance with an explanation that HOC was "improperly named as Stryker Corporation" and that HOC was the true party in interest. As HOC explained, and DePuy has not contested, "HOC is a wholly-owned subsidiary of Defendant Stryker Corporation. Because HOC employed Waber at the time of his resignation, it is the correct party to this action." HOC further explained that although the employment contract at the heart of the dispute is between Waber and "Stryker Corporation," the contract defines "Stryker Corporation" to include "subsidiaries, divisions, and affiliates," and HOC is such a subsidiary. 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. See also Devlin v. Scardelletti , 536 U.S. 1, 7, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002) (considering the rights of non-named class members, noting that "[w]e have never, however, restricted the right to appeal to named parties to the litigation."); Commodity Futures Trading Comm'n v. Topworth Int'l, Ltd. , 205 F.3d 1107, 1113 (9th Cir. 1999) (allowing appeal by individual investor based on participation in the district court, pro se participation, and formal objections to determinations).

Moreover, HOC properly became a party to this litigation in the district court case, albeit after the district court denied the motion to transfer. We are aware of no authority requiring a party to join the litigation prior to a decision on a motion in order to appeal the final ruling on the issue addressed by that motion. And even if HOC's official joinder into the case after the district court's February 5, 2019 decision were deemed to preclude its appeal of that decision, HOC was a party at the time of the district court's partial summary judgment decision, which also addressed the transfer issue.

For these reasons, we have jurisdiction to hear HOC's appeal under 28 U.S.C. § 1291.

B

We review the district...