Hermione Granger v. Wizard Chess Corp. | Joseph William Singer | October 28, 2014

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Hermione Granger v. Wizard Chess Corp.

Hermione Granger worked for a computer software company called Wizard Chess Corp. for fifteen years. Wizard Chess's principal place of business is in California. At the time Granger was hired, she lived in Lexington, Massachusetts. She applied for the job at Wizard Chess's campus in Lexington, was hired, and worked there. Granger began as a technician but rose to management positions over time. When the company merged with another corporation, she was let go with no notice. Her employment contract had a noncompetition clause that prohibits her from working for a competing firm for two years after ending her employment with Wizard Chess. The contract states that it "is governed by Massachusetts law."

One month after being laid off, Granger accepted employment with a competing company in Cupertino, California, called the Alohamora Company. She moved to California and started working for Alohamora. Simultaneously, she sued Wizard Chess in California state court seeking a declaration that the choice-of-law clause in her old employment contract is unenforceable (at least with respect to her new employment in California), that California law governs the issue of whether she can take a new job in California, and that under California law the noncompetition clause is unenforceable because it violates California public policy. Defendant Wizard Chess argued that the choice-of-law clause is enforceable and that it would be unconstitutional to apply the law of any state other than that of Massachusetts to the contract, including the noncompetition clause.

In a quick proceeding, the California trial court held that the choice-of-law clause was not enforceable with respect to jobs in California, and that California law applied so as to free Granger from any restrictions imposed by the noncompetition clause when looking for or accepting employment opportunites in California. An expedited appeal to the California Appeals Court reversed, noting that the choice-of-law clause would likely be enforceable in Massachusetts courts, and that California should defer to that judgment and apply Massachusetts law to a contract involving an employment relationship centered in Massachusetts. Massachusetts law allows noncompetition clauses in employment contracts to be enforced if they are reasonably limited in space and time and related to legitimate business interests such as protecting trade secrets such as those possessed by Granger. A dissenting opinion would have affirmed the trial court's ruling on the ground that Massachusetts law violates California public policy and cannot prevent a willing employer and a willing employee from working together in California. Plaintiff has appealed to the California Supreme Court which accepted the appeal on an expedited basis. SIx months have passed since Granger began working for Alohamora in California and the clause only prohibits her doing so for a two year period.

Parallel to the California suit is a claim brought by Wizard Chess Corp. against Granger in state court in Massachusetts. The trial court found the choice-of-law clause enforceable and applied Massachusetts law to the noncompetition clause. Because the market for computer software is worldwide, the court determined that the lack of any geographic limits on enforceability of the noncompetition clause was reasonable since Alohamora Company was in fact a competitor to Wizard Chess Corp., operating in the same worldwide market. The court also held that two years was a reasonable period of time under Massachusetts law for the noncompetition clause to operate. Consistent with that ruling, the court issued a preliminary injunction ordering Granger not to work for Alohamora Company.

However, when apprised of the conflicting California ruling voiding the noncompetition clause, the trial judge stayed execution of the order pending appeal. The Supreme Judicial Court has accepted an appeal, bypassing the mid-level Court of Appeals. As of now, there is no definitive ruling by the SJC on the question of whether the Massachusetts courts should interpret Massachusetts law of contracts, noncompetition clauses, and conflict of laws to justify issuing an injunction preventing a Massachusetts employee from taking a job in California. Because the trial court order has been stayed pending appeal, Massachusetts law provides that the trial court order is not a final judgment and thus the full faith and credit clause of the US Constitution does not obligate California courts to enforce the Massachusetts order. The parallel lawsuits continue.

The California Supreme Court must answer the following questions:

 

  1. Is the choice-of-law clause for Massachusetts law enforceable in a California court so as to prevent a Massachusetts employee from working for a new employer in California? In answering that question, consider the relevance of the fact that the Massachusetts courts are likely to enforce the noncompetition clause. Should the California Supreme Court should take that into account in deciding whether to enforce the choice-of-law clause or should it decide the question irrespective of the way the Massachusetts courts would decide the question?
  2. If the choice-of-law clause is enforceable, what is the appropriate remedy? Should the California court apply Massachusetts remedies law and order plaintiff to quit her job or should it apply California remedies law and allow her to continue working but pay damages if her old employer can prove that she has used trade secrets in her new job?

 

π = Hermione Granger

∆ = Wizard Chess Corp.

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May 13, 2015

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Joseph William Singer

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