Golden v. Cal. Emergency Physicians Med. Grp.

896 F.3d 1018

Donald GOLDEN, Plaintiff-Appellant,

v.CALIFORNIA EMERGENCY PHYSICIANS MEDICAL GROUP; Med America; Mark Alderdice; Robert Buscho, Defendants-Appellees.

No. 16-17354

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 4, 2017, San Francisco, California

Filed July 24, 2018

Matthew Borden (argued) and J. Noah Hagey, Braunhagey & Borden LLP, San Francisco, California, for Plaintiff-Appellant.

Sarah E. Robertson (argued), Jonathan McNeil Wong, and Mark A. Delgado, Donahue Fitzgerald LLP, Oakland, California, for Defendants-Appellees.

Before: Milan D. Smith, Jr., and Sandra S. Ikuta, Circuit Judges, and John D. Bates,^* Senior District Judge.

Dissent by Judge Milan D. Smith, Jr.

BATES, Senior District Judge:

We are now called on to answer the question that we left open when this case was last before us: whether a provision of a settlement agreement between Dr. Donald Golden and his former employer, the California Emergency Physicians Medical Group ("CEP"), places a "restraint of a substantial character" on Dr. Golden’s medical practice. See Golden v. Cal. Emergency Physicians Med. Grp. , 782 F.3d 1083, 1093 (9th Cir. 2015) (" Golden I "). We conclude that it does, and that it therefore runs afoul of California law. See Cal. Bus. & Prof. Code § 16600.

I

Dr. Golden graduated from medical school in 1995.¹ He later completed a fellowship in geriatrics and a residency in internal medicine, and in 2000 he began working for CEP, a partnership of nearly 2,000 physicians who staff emergency rooms and other medical facilities in California and ten other states. While at CEP, Dr. Golden worked primarily as an emergency room physician, although he also worked part-time in several other facilities, including two family practice clinics and two occupational medicine clinics.

In 2007, CEP terminated Dr. Golden’s employment, ostensibly because he lacked board certification.² Dr. Golden sued CEP in Alameda County Superior Court, claiming that he had in fact been fired because of his race. CEP removed Dr. Golden’s suit to federal court and, following a settlement conference before a magistrate judge, the parties orally agreed to settle the case.

When the settlement agreement was later reduced to writing, however, Dr. Golden refused to sign it. He claimed that one of its provisions, Paragraph 7, was contrary to California’s statutory prohibition on contracts "by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind." Cal. Bus. & Prof. Code § 16600. Paragraph 7 states:

The parties agree that, except as specified in Paragraphs 7a and b, below, Golden shall not be entitled to work or be reinstated at any CEP-contracted facility or at any facility owned or managed by CEP. The parties further agree that if CEP contracts to provide services to, or acquires rights in, a facility that is an emergency room as defined and regulated by California law at which Golden is employed or rendering services, CEP has the right to and will terminate Golden from any work in the emergency room without any liability whatsoever. Similarly, the parties agree that if CEP contracts to provide services to, or acquires rights in, a facility at which Golden is employed or rendering services as a hospitalist, CEP has the right to and will terminate Golden from any work as a hospitalist without any liability whatsoever.

Paragraph 7a states that if CEP contracts with or acquires rights in "an urgent care facility that is not an emergency room ... and Golden is already working at that urgent care facility, Golden may be entitled to continue working at that urgent care facility" so long as he meets certain criteria. Paragraph 7b goes on to state the terms of Dr. Golden’s continued employment if the conditions in Paragraph 7a are met.

Following Dr. Golden’s refusal to sign the agreement, his attorney withdrew, intervened in the proceedings, and moved to enforce the agreement so that he could collect his fee. The district court granted the motion and ordered Dr. Golden to sign, reasoning that because Paragraph 7 would not prevent Dr. Golden from competing with CEP, it was not a restraint on his medical practice, and section 16600 did not apply. Dr. Golden continued to refuse to sign the agreement, however, and he instead took his first appeal to this Court. See Golden I , 782 F.3d at 1085.

We reversed the district court’s order, holding that the court had misconstrued section 16600. Id. at 1092–93. The statute, we explained, applies not only to noncompetition agreements but also to any contractual provision that places a "restraint of a substantial character" on a person’s ability to practice a profession, trade, or business. Id. at 1092 (quoting Chamberlain v. Augustine , 172 Cal. 285, 156 P. 479, 480 (1916) ). Thus, the fact that Paragraph 7 did not prohibit Dr. Golden from competing with CEP was not dispositive; rather, the question was whether Paragraph 7 substantially restrained Dr. Golden’s practice of medicine, particularly in light of CEP’s large presence in California. Id. at 1089, 1092–93. Because the factual record on that question was not fully developed, however, we remanded to the district court to determine in the first instance whether Paragraph 7 "constitutes a restraint of a substantial character to Dr. Golden’s medical practice." Id. at 1093.

On remand, the district court again ordered Dr. Golden to sign the settlement agreement, concluding this time that Paragraph 7 was not a restraint of a substantial character. The court also denied Dr. Golden’s request for a jury trial and ruled that an evidentiary hearing was unnecessary. Dr. Golden timely filed this appeal, challenging both the district court’s order directing him to sign the agreement and its decision not to hold an evidentiary hearing.³

II

We review a district court’s order enforcing a settlement agreement for abuse of discretion. See Golden I , 782 F.3d at 1089. Like any other contract, however, we review the validity of a settlement agreement de novo , and a district court abuses its discretion if it incorrectly determines that a settlement agreement is enforceable. See id. ; Tompkins v. 23andMe, Inc. , 840 F.3d 1016, 1021 (9th Cir. 2016). The district court’s interpretation of state contract law is likewise reviewed de novo . L.A. Lakers, Inc. v. Fed. Ins. Co. , 869 F.3d 795, 800 (9th Cir. 2017).

CEP contends that the district court’s determination that Paragraph 7 did not impose a "restraint of a substantial character" on Dr. Golden’s medical practice is a factual finding that we review for clear error. We disagree. We think the question is better framed as a "mixed question[ ] of law and fact"—one in which "the issue is whether the facts satisfy the statutory standard." In re Cherrett , 873 F.3d 1060, 1066 (9th Cir. 2017) (citation omitted). Thus, while we defer to the district court’s specific factual findings as to the nature and extent of the parties’ respective professional activities, we review de novo both the district court’s construction of Paragraph 7 and its conclusion that, in light of the facts found, Paragraph 7 withstands scrutiny under section 16600.

III

Section 16600 of the California Business and Professions Code provides, with certain exceptions not relevant here, that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." In Golden I , we concluded that section 16600 extends beyond noncompetition agreements to any "restraint of a substantial character," citing both the statute’s sweeping language and the California decisions interpreting that language. See 782 F.3d at 1090–92. Similar considerations guide our analysis of what qualifies as a "substantial" restraint under this standard. See Int’l Bus. Machs. Corp. v. Bajorek , 191 F.3d 1033, 1041 (9th Cir. 1999) ("We are not free to read California law without deferring to our own precedent on how to construe it.").

A

We begin, as always, with the statute’s text. See Nat’l Ass’n of Mfrs. v. Dep’t of Def ., ––– U.S. ––––, 138 S.Ct. 617, 631, 199 L.Ed.2d 501 (2018). As we noted in Golden I , 782 F.3d at 1090, section 16600 speaks in categorical terms: it refers to "every contract by which anyone is restrained" from practicing a "profession, trade, or business of any kind," Cal. Bus. & Prof. Code § 16600 (emphases added). This language also stands in stark contrast to the statute’s handful of narrow exceptions, which pertain mostly to the sale or dissolution of businesses. See, e.g. , Cal. Bus. & Prof. Code § 16601 ("Any person who sells the goodwill of a business ... may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold ... has been carried on, so long as the buyer ... carries on a like business therein."). As we said in Golden I , these exceptions demonstrate that the California legislature knew how to describe specific restraints in "considerable detail" and that, had it intended to draw section 16600 more narrowly, it easily could have done so. 782 F.3d at 1090.

We also noted in Golden I how broadly California’s courts have read section 16600. See id. at 1091–92. In Chamberlain v. Augustine , for example, the California Supreme Court invalidated a provision of a contract for the sale of stock in the Los Angeles Foundry Company, which would have required the seller to pay $5,000 if he worked for or acquired an interest in any other foundry in California, Oregon, or Washington within three years of the date of the sale. 156 P. at 479–80. Although the provision applied in only three states and allowed the seller "to act as laborer or molder in various foundries," the court nonetheless concluded that it imposed a "restraint of a substantial character" on his metalworking trade, explaining that "[t]he statute makes no exception in favor of contracts only in partial restraint of trade." Id. at 480.

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