Golden v. California Emergency Physicians Medical Group, 896 F.3d 1018 (2018)
Golden, an emergency room physician, was fired by his employer – CEP. He sued claiming that the firing was motivated by race. Shortly before trial was set to begin, Golden and CEP settled and placed their settlement on the record.Apparently the attorneys had reduced the agreement to written deal points that provided for CEP to pay Golden a large sum of money, and for Golden to agree that he would not be employed by CEP or in businesses in which CEP had an interest in the future.
After a formal settlement agreement was drafted, Golden refused to sign it. Golden objected to the scope of the provision that specified that he would be prohibited from working for any hospital that contracted with CEP in the future. The agreement even provided that if he was working for a non-CEP hospital and CEP began providing services at that hospital, he would be immediately fired with no compensation or recourse.
Golden argued that these provisions were a void restraint of trade in violation of California Business and Professions Code Section 16600.The trial court disagreed, holding that because the provision only restrained Golden from working for CEP, as opposed to competing with CEP, Section 16600 was not violated. On appeal in 2015, the 9th Circuit reversed holding that substantial restraints of any type, even if they do not restrain competition, are prohibited. The case was remanded for further factual development to determine if the restraint in the settlement agreement was “substantial.”
On remand, the trial court found the restraint to be speculative and insubstantial. The court ordered Golden to sign the settlement agreement and dismissed his lawsuit. In the present appeal, the 9th Circuit reversed again, this time holding that the restraint was substantial and immediate, not speculative. The 9th Circuit also held that the restraint provision was a material term of the settlement. They held that the settlement agreement was void because it contained the illegal restraint, reversed the dismissal and remanded for trial on the merits.
The case is notable not just because of the jurisprudence surrounding restraints of trade, but also because of a few of the quirky facts that are described in the opinions. In the 2015 appeal, CEP argued that the case was not ripe because there was no way to tell if Golden would ever violate the clause regarding future employment by hospitals that already, or subsequently, had contracts with CEP. Dissents in both the 2015 and 2018 opinions championed this argument. However, the majorities found the likelihood of future problems substantial enough that it amounted to an illegal restraint. No one discussed in detail that Golden’s lawsuit was dismissed. Certainly, if the settlement agreement was void in its entirety it should not have been enforced at all. Therefore, the dismissal should not have been entered and required immediate intervention.
The case is unusual also because one of the chief proponents of enforcing the settlement was Golden’s own attorney. When Golden refused to sign the settlement agreement, his attorney moved to withdraw as his counsel. The record was unclear about whether the trial court granted that motion. However, his attorney was allowed to intervene in the lawsuit to push for enforcement since he was on a contingent fee and wanted to collect it.
The case also points up the perils of reading an incomplete settlement into the record. The dissenting judge in the 2018 opinion called Golden an “humbug” for reneging on an agreement with which he indicated assent when it was read into the record. The dissenter explained that the agreement had been reduced to writing before it was read into the record. The majority in the 2015 appeal indicated that the formal agreement was only drafted later. The majority in the 2018 appeal could have held that there was no meeting of the minds because the details of the restraint clause were material and the parties did not actually agree to them. But that was not what the majority held. The majority was satisfied that the parties reached an agreement on all of the material terms, but the restraint term was illegal, rendering the entire agreement void. One might ask if the agreement would have been saved by an excision clause.