1017-00004 · Entities. Aurelius Global Media Group · Case Assessment & Strategy

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CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 1999 Avenue of the Stars, Suite 2700 Los Angeles, California 90067 Telephone: (310) 555-8200 Facsimile: (310) 555-8201

MEMORANDUM

TO: Gregory Tanaka, Vice President, Legal & Compliance, Aurelius Media Americas Inc. Philippa Cartwright, General Counsel, Aurelius Global Media Group PLC

FROM: Nadia Petrov

DATE: December 22, 2022

RE: Choice-of-Law Analysis — New York vs. California Governing Law for Aldrich Employment Agreement § 14.3

Matter No.: 1017-00004

I. Issue Presented

You have asked us to analyze whether a California court will enforce the New York choice-of-law clause contained in Section 14.3 of the Employment Agreement between Aurelius Media Americas Inc. ("AMA") and Gavin Aldrich ("Aldrich"), and, if not, the implications of that determination for the enforceability of the restrictive covenant provisions set forth in Section 9 of the Agreement.

Section 14.3 of the Employment Agreement between AMA and Aldrich (dated September 5, 2017, as amended by the First Amendment dated August 1, 2020) provides, in its entirety:

"This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws principles."

The central question presented is whether a California court — specifically, the Superior Court of the State of California, County of Los Angeles, in which AMA's cross-claims against Aldrich are pending (Case No. 22STCV41087, assigned to the Honorable Catherine Villanueva, Department 52) — will honor this New York choice-of-law clause as applied to the restrictive covenant provisions set forth in Section 9 of the Employment Agreement.

The resolution of this threshold question has dispositive consequences for AMA's ability to enforce the non-competition clause contained in Section 9.1 of the Employment Agreement. If New York law governs, the non-competition clause — which imposes an eighteen (18)-month post-termination prohibition on Aldrich's employment with or provision of services to any "Competing Enterprise" (defined as any entity deriving twenty-five percent (25%) or more of its revenue from the production, licensing, or distribution of unscripted or reality television content in North America) — may be enforceable, as New York courts generally enforce reasonable non-competition agreements that protect legitimate business interests, including the protection of trade secrets, confidential information, and client relationships. See, e.g., Vane Kaplan CPAs LLP Seidman v. Hirshberg, 93 N.Y.2d 382, 388–89 (1999); Predding, Roberts Assocs., Inc. v. Strauman, 40 N.Y.2d 303, 307 (1976).

Conversely, if California law governs, the non-competition clause is almost certainly void. California Business and Professions Code Section 16600 provides that, with narrow statutory exceptions not applicable here, "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." The California Supreme Court's landmark decision in Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937 removed any remaining ambiguity regarding the breadth of Section 16600's prohibition, holding that it voids all non-competition agreements except those falling within the narrow statutory exceptions set forth in Sections 16601 (sale of goodwill of a business), 16602 (dissolution of a partnership), and 16602.5 (dissolution or sale of an interest in a limited liability company). Id. at 945–46.

This analysis has direct bearing on AMA's cross-claims against Aldrich in the pending litigation and on the overall litigation and settlement strategy going forward.

II. Summary of Restrictive Covenant Provisions at Issue

Section 9 of the Employment Agreement contains four distinct restrictive covenant provisions, each of which presents a separate enforceability question under California law. These provisions are summarized in the table below:

The enforceability of each of these provisions under California law is addressed in detail in the companion memorandum dated December 20, 2022, entitled Enforceability of Restrictive Covenants Under Cal. Bus. & Prof. Code § 16600 (the "Companion Memorandum"). This memorandum focuses solely on the threshold choice-of-law question — that is, whether a California court will apply New York law or California law to evaluate the enforceability of these provisions.

III. Factual Background Relevant to Choice-of-Law Analysis

The following factual background is drawn from the Employment Agreement, the First Amendment, publicly available corporate filings, discovery materials produced to date, and information provided by the client. The facts are presented here to the extent relevant to the choice-of-law analysis under the Restatement (Second) of Conflict of Laws.

A. Aurelius Global Media Group PLC

Aurelius Global Media Group PLC ("AGMG") is a United Kingdom-headquartered public limited company incorporated in England and Wales under the Companies Act 2006 (Companies House No. 08412667). AGMG's corporate headquarters are located at 34 Kingsway, London WC2B 6EX, United Kingdom. AGMG's ordinary shares are listed on the London Stock Exchange under the ticker symbol "AGMG." As of November 1, 2022, AGMG's market capitalization was approximately £3.82 billion (approximately $4.41 billion at prevailing exchange rates). For fiscal year 2022, AGMG reported consolidated revenue of approximately £2.14 billion (approximately $2.47 billion). AGMG maintains a global headcount of approximately 18,500 employees across 14 countries, with its largest operational presence in the United Kingdom, the United States, Australia, and Germany. Sir Edmund Halesworth serves as Chief Executive Officer, and Malcolm Dunmore serves as Chief Financial Officer.

AGMG maintains a small corporate office in New York, New York, which serves primarily as a hub for investor relations, financial operations, and coordination with AGMG's external auditor, Graystone & Parr LLP, headquartered at 200 Park Avenue, Suite 3500, New York, New York 10166. The New York office does not serve as a center for AGMG's media production, content licensing, or distribution activities, which are managed through AGMG's operating subsidiaries in their respective territories.

B. Aurelius Media Americas Inc.

Aurelius Media Americas Inc. ("AMA") is a wholly owned subsidiary of AGMG. AMA is incorporated in the State of Delaware (Secretary of State File No. 5284731) and is qualified to do business in the State of California. AMA's principal office is located at 8500 Sunset Boulevard, Suite 1400, West Hollywood, California 90069. AMA's California registered agent for service of process is Pacific Statutory Agents Inc., located at 2901 W. Alameda Avenue, Suite 200, Burbank, California 91505.

AMA maintains approximately 3,200 employees in the United States, of whom approximately 2,400 (or approximately 75%) are based in California. AMA's United States revenue for fiscal year 2022 was approximately $687.4 million. AMA's operations are focused on the production, licensing, and distribution of unscripted and reality television content for major broadcast networks and streaming platforms. Jonathan Mercer serves as President of AMA.

It is significant for purposes of this analysis that AMA is incorporated in Delaware, not New York. AMA does not maintain a principal office, branch office, or production facility in the State of New York. AMA does not employ any production personnel in New York.

C. Gavin Aldrich

Gavin Aldrich served as Senior Vice President of Original Content and Executive Producer at AMA from September 5, 2017, through October 14, 2022, a period of approximately five years and one month. At the time of his termination, Aldrich's base salary was $485,000 per year, exclusive of production bonuses, equity incentive compensation, and other benefits. Aldrich resides at 1140 Tower Road, Beverly Hills, California 90210, and has resided in California continuously since at least 2012 — predating his employment with AMA by approximately five years.

During the course of his employment, Aldrich was responsible for overseeing AMA's slate of unscripted and reality television programming, managing fourteen (14) show units, supervising approximately 120 direct and indirect reports (all California-based), and maintaining relationships with key network and platform buyers. Aldrich was credited as Executive Producer on several of AMA's highest-rated series, including programs broadcast on major broadcast networks and streaming platforms.

D. The Employment Agreement

The Employment Agreement was executed on September 5, 2017, in connection with Aldrich's commencement of employment with AMA. All negotiations leading to the execution of the Employment Agreement took place in California, and the Employment Agreement was signed by Aldrich in California. AMA's signatory, then-President Margaret Liu, also executed the Agreement in California.

On August 1, 2020, the parties executed the First Amendment to the Employment Agreement, which modified Aldrich's compensation structure, extended the term of the Agreement, and made certain other changes. The First Amendment was negotiated through Aldrich's then-counsel, Laura Kaminski of Kaminski & Associates LLP, a Los Angeles-based entertainment law firm. All negotiations relating to the First Amendment took place in California. Critically, the First Amendment did not modify Section 14.3 (the choice-of-law clause) or any of the restrictive covenant provisions in Section 9.

The Employment Agreement was drafted by AGMG's New York-based outside employment counsel, Whitfield & Crane LLP, located at 787 Seventh Avenue, New York, New York 10019. This drafting connection represents one of the few links between the Employment Agreement and the State of New York.

E. Aldrich's Work Location

Throughout his entire tenure with AMA, Aldrich was based exclusively in California. He performed substantially all of his duties and responsibilities from AMA's California facilities, principally the West Hollywood headquarters at 8500 Sunset Boulevard, Suite 1400, and AMA's production facility at 4024 Penmark Strategy Partners Avenue, Studio City, California 91604. Aldrich managed California-based production operations across AMA's fourteen (14) show units, all of which operated under applicable California wage and hour requirements, including Industrial Welfare Commission ("IWC") Wage Order No. 12 (Motion Picture Industry). There is no evidence in the record that Aldrich was ever asked to relocate to New York, that Aldrich maintained an office or workspace in New York, or that Aldrich traveled to New York for any purpose other than occasional industry events and periodic meetings with AGMG corporate leadership.

F. Connection to New York

The connections between the Employment Agreement and the State of New York are limited to the following: (1) AGMG maintains a small corporate office in New York for investor relations and financial operations; (2) the Employment Agreement was drafted by AGMG's New York-based outside employment counsel; and (3) AGMG's external auditor, Graystone & Parr LLP, is headquartered in New York. AMA itself is not a New York corporation, does not maintain offices in New York, does not employ production personnel in New York, and does not derive any meaningful portion of its revenue from New York-based operations. AGMG, the parent company, is a United Kingdom entity, not a New York entity.

G. Aldrich's Anticipated Future Employment

Aldrich resides in California, and his professional network and the broader unscripted and reality television industry are predominantly centered in Los Angeles, California. The evidence indicates that Aldrich's future employment will be located in California or will otherwise significantly affect California's labor market. Indeed, Aldrich has already been reported by industry trade publications as being in discussions with at least two Los Angeles-based production companies regarding senior creative and executive producer roles.

IV. Applicable Legal Framework

A. California's Approach to Contractual Choice-of-Law Clauses

California courts apply the analytical framework set forth in the Restatement (Second) of Conflict of Laws § 187 to determine whether to honor a contractual choice-of-law provision that selects the law of another state. See Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, 464–66; Washington Mutual Bank, FA v. Superior Court (2001) 24 Cal.4th 906, 916–17. The California Supreme Court has expressly adopted the Restatement framework as the governing standard for evaluating contractual choice-of-law clauses. Nedlloyd, 3 Cal.4th at 464–65.

The Restatement (Second) of Conflict of Laws § 187 draws a critical distinction between two categories of contractual issues:

Section 187(1) provides that, if the particular issue is one that the parties could have resolved by an explicit provision in the agreement directed to that issue, the law of the state chosen by the parties to govern their contractual rights and duties will be applied. In other words, where the parties are free to determine the issue by agreement — such as the measure of damages, the manner of performance, or the interpretation of contract terms — the court will generally honor their contractual choice of law, subject only to the requirement that the chosen state have some substantial relationship to the parties or the transaction, or that there be some other reasonable basis for the choice.

Section 187(2) provides a more searching analysis for issues that the parties could not have resolved by an explicit provision in the agreement — that is, issues that implicate regulatory policies or third-party interests beyond the private contractual relationship. Even where there is a substantial relationship between the chosen state and the parties or the transaction, the law of the chosen state will not be applied if:

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice; or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

The § 187(2)(b) analysis thus requires a court to evaluate three distinct elements: (i) whether the law of the chosen state is contrary to a fundamental policy of another state; (ii) whether that other state has a materially greater interest than the chosen state in the determination of the particular issue; and (iii) whether that other state would be the state of the applicable law in the absence of the choice-of-law clause, under the "most significant relationship" test of Restatement § 188. All three elements must be satisfied before the court will decline to honor the parties' contractual choice of law.

B. Distinction Between § 187(1) and § 187(2)

The threshold question in the analysis is whether the enforceability of restrictive covenant provisions — particularly non-competition clauses — falls within § 187(1) (issues that parties could have resolved by explicit agreement) or § 187(2) (issues implicating regulatory policy that parties cannot freely waive by contract).

This question has been definitively resolved by California courts. The enforceability of restrictive covenants, and in particular non-competition agreements, implicates California's strong regulatory policy favoring employee mobility and open competition. This policy is embodied in Business and Professions Code Section 16600, which reflects the state's legislative judgment regarding the appropriate balance between the interests of employers in protecting their competitive advantages and the interests of employees in pursuing their chosen professions without unreasonable restraint. See Edwards v. Kraft Quill CPAs LLP, 44 Cal.4th at 945 (describing § 16600 as reflecting California's "strong public policy" in favor of open competition and employee mobility); Advanced Bionics Corp. v. Harborview Corporation, Inc. (2002) 29 Cal.4th 697, 706 (same).

Because the enforceability of non-competition agreements is a matter of regulatory policy — one that implicates not merely the private rights of the contracting parties but also the broader public interest in a competitive labor market — the § 187(2) analysis governs. The parties cannot, by contractual agreement, waive the protections afforded by Section 16600 any more than they could waive other non-waivable statutory protections of the California Labor Code.

Accordingly, the analysis that follows focuses on the requirements of § 187(2)(b), which is the dispositive inquiry for restrictive covenant provisions.

V. Analysis

A. Does New York Have a Substantial Relationship to the Parties or Transaction?

The first question under § 187(2) is whether the chosen state — here, New York — has a "substantial relationship to the parties or the transaction," or whether there is some "other reasonable basis for the parties' choice." Restatement (Second) of Conflict of Laws § 187(2)(a).

The connections between the Employment Agreement and the State of New York are as follows:

1. AGMG (the parent entity, not the employer) maintains a small corporate office in New York, which serves as a hub for investor relations and financial operations. This office is not involved in AGMG's or AMA's content production, licensing, or distribution activities and is not the location at which any decision relating to Aldrich's employment was made.

2. The Employment Agreement was drafted by Whitfield & Crane LLP, AGMG's New York-based outside employment counsel. The fact that the drafter of the Agreement was located in New York does not, in and of itself, establish a meaningful connection between the substantive terms of the Employment Agreement and the State of New York. The choice to retain New York counsel appears to have been driven by AGMG's pre-existing relationship with Whitfield & Crane, not by any substantive connection between the employment relationship and New York.

3. AMA is incorporated in Delaware, not New York. AGMG itself is incorporated in England and Wales. Neither the employer nor the parent entity is a New York corporation or maintains its principal place of business in New York.

4. AGMG's external auditor, Graystone & Parr LLP, is headquartered in New York. This connection has no relevance to the employment relationship between AMA and Aldrich.

These connections to New York are, by any measure, tenuous. AMA — the actual employer and party to the Employment Agreement — has no New York office, no New York employees, no New York production facilities, and no New York incorporation. AGMG's small New York office, while providing some geographical link to the State of New York, does not transform what is fundamentally a California employment relationship into one with a meaningful New York nexus.

That said, courts applying § 187(2)(a) have at times accepted relatively limited connections as sufficient to establish a "substantial relationship." For example, some courts have found a substantial relationship where a party's place of incorporation or principal office is located in the chosen state, even where the actual performance of the contract occurs elsewhere. See, e.g., Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th at 467 (finding a substantial relationship where the chosen state was the home of one of the contracting parties). Under this permissive standard, AMA could argue that AGMG's New York office — combined with the New York drafting connection — provides a sufficient basis for the choice-of-law designation.

However, even assuming arguendo that New York has a "substantial relationship" to the parties or the transaction sufficient to satisfy § 187(2)(a), the analysis does not end there. The critical inquiry is whether the requirements of § 187(2)(b) are met — that is, whether the application of New York law would be contrary to a fundamental policy of California, whether California has a materially greater interest than New York, and whether California law would apply in the absence of the choice-of-law clause. As set forth below, all three requirements are satisfied, and it is on prong (b) that AMA's argument for New York law fails decisively.

B. Does California Have a Fundamental Policy Against Non-Competes?

The first element of the § 187(2)(b) analysis requires a determination of whether the law of the chosen state (New York) is "contrary to a fundamental policy" of another state (California). The answer here is unequivocal.

California Business and Professions Code Section 16600 provides:

"Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

Section 16600 has been part of California law since the enactment of the Civil Code of 1872. Its roots trace to an even earlier California statute, the Act Concerning Monopolies (1850). It represents one of the most deeply embedded and long-standing legislative policies in California jurisprudence.

The California Supreme Court has repeatedly confirmed that Section 16600 embodies a "strong public policy" of the State of California. In Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, the Court issued a definitive pronouncement regarding the scope and force of Section 16600. The Court held that Section 16600 voids all non-competition agreements except those falling within the narrow statutory exceptions set forth in Sections 16601, 16602, and 16602.5 — which apply only to the sale of the goodwill of a business, the dissolution of a partnership, or the dissolution or sale of a membership interest in a limited liability company, respectively. Id. at 945–46. The Court expressly rejected the so-called "narrow restraint" exception — under which some lower courts and federal courts had previously held that Section 16600 permitted non-competition agreements that imposed only a partial restraint on the employee's ability to practice his or her profession. Id. at 946–48. The Court explained that Section 16600 "protects Californians and ensures 'that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice.'" Id. at 945 (quoting Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 859).

In Advanced Bionics Corp. v. Harborview Corporation, Inc. (2002) 29 Cal.4th 697, 706, the California Supreme Court similarly confirmed that California's prohibition against non-competition agreements reflects a "strong, settled public policy" of the state.

Most directly relevant to the choice-of-law question presented here, the California Court of Appeal's decision in Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, squarely held that California's prohibition of non-competition agreements constitutes a "fundamental policy" for purposes of the Restatement § 187(2) analysis. In Application Group, the Court of Appeal considered whether a Maryland choice-of-law clause in an employment agreement could be used to enforce a non-competition covenant against a California-based employee. The court held that it could not, explaining:

"California has a strong public policy against noncompetition agreements. . . . Under the Restatement approach, if enforcement of the chosen state's law on a particular issue would be contrary to a fundamental policy of the state that has a materially greater interest in the issue, the chosen state's law will not be applied."

Application Group, 61 Cal.App.4th at 900–02. The court further held that California's interest in protecting the employment mobility of its residents constitutes not merely a "policy" but a "fundamental policy" — one that cannot be overridden by a contractual choice-of-law clause. Id. at 902.

This line of authority has been consistently applied by California courts in the decades since Application Group was decided. California courts have refused to apply out-of-state law to validate non-competition agreements against California-based employees in a range factual contexts. See, e.g., Kolani v. Gluska (1998) 64 Cal.App.4th 402, 407 (applying § 16600 regardless of choice-of-law provision); The CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1240 (reaffirming that § 16600 is a fundamental policy).

It is also worth noting, for purposes of identifying the trajectory of California's public policy in this area, that the California Legislature has enacted Assembly Bill 1076 (AB 1076), codified as Cal. Bus. & Prof. Code § 16600.5, which takes effect on January 1, 2024. Section 16600.5 expressly prohibits employers from entering into or attempting to enforce any non-compete clause or non-compete agreement, regardless of whether the contract was signed, and regardless of whether the employment was maintained, outside of California. Although AB 1076 was not yet in effect at the time of Aldrich's termination (October 14, 2022) and does not directly govern the present dispute, it reinforces the unmistakable legislative trend toward ever-stronger protection of California workers against non-competition restraints, and it further underscores the fundamental nature of California's policy against non-competes.

Conclusion: California's policy against the enforcement of non-competition agreements is unquestionably a "fundamental policy" of the State of California within the meaning of Restatement (Second) of Conflict of Laws § 187(2)(b). This element is clearly satisfied.

C. Does California Have a Materially Greater Interest Than New York?

The second element of the § 187(2)(b) analysis requires a determination of whether the state whose fundamental policy would be offended — here, California — has a "materially greater interest" than the chosen state — here, New York — in the determination of the particular issue.

The contacts connecting the Employment Agreement, the parties, and the employment relationship to California are overwhelming:

• Aldrich is a California resident. He resides at 1140 Tower Road, Beverly Hills, California 90210, and has resided in California continuously since at least 2012.

• Aldrich performed all of his services in California. Throughout his entire five-year tenure with AMA, Aldrich worked exclusively from AMA's California facilities — principally the West Hollywood headquarters and the Studio City production facility. He was never asked to relocate to New York, was never provided an office or workspace in New York, and traveled to New York only occasionally for industry events and corporate meetings.

• AMA's principal office is in California. AMA operates from 8500 Sunset Boulevard, Suite 1400, West Hollywood, California 90069. Approximately 75% of AMA's United States employees are California-based.

• Aldrich's future employment will be in California. The unscripted and reality television industry is predominantly based in Los Angeles, California. Aldrich's professional network, industry contacts, and employment prospects are centered in California. Enforcement of the non-competition clause would directly restrain Aldrich's ability to earn a livelihood in California's entertainment industry.

• California has a direct sovereign interest in the employment mobility of its residents. The California Legislature has made a considered policy judgment — embodied in Section 16600 and repeatedly affirmed by the California courts — that California workers should be free to pursue their chosen professions without contractual restraint. This interest is at its zenith when the affected employee is a California resident performing services in California.

By contrast, New York's connections to this dispute are attenuated at best:

• Neither Aldrich nor AMA is based in New York. Aldrich does not reside in New York, has never resided in New York, and has no plans to work in New York. AMA does not maintain offices, production facilities, or employees in New York.

• AMA is a Delaware corporation, not a New York corporation. AGMG, the parent company, is a United Kingdom entity, not a New York entity.

• AGMG's New York office is a small investor relations and financial operations hub with no connection to AMA's content production operations or to Aldrich's employment.

• The only New York connection of any significance is that the Employment Agreement was drafted by New York-based outside counsel. This drafting connection does not create a meaningful New York interest in the enforceability of the restrictive covenants.

New York's interest in this dispute is, at most, a generalized interest in the enforcement of commercial contracts. While that interest is real, it is not specific to the particular issue at hand — the enforceability of a non-competition restraint against a California-based employee working in California for a company headquartered in California. California's interest, by contrast, is specific, concrete, and directly implicated by the facts of this case: it is the interest of the state in ensuring that its residents are not prevented from earning a livelihood in the state's dominant industry.

The Application Group court directly addressed this comparative interest analysis in the context of a similar factual pattern — an out-of-state employer seeking to enforce a non-competition agreement against a California-based employee through a contractual choice-of-law clause — and concluded that California's interest was materially greater than the interest of the chosen state. 61 Cal.App.4th at 901–02. The same result follows here.

Conclusion: California has a materially greater interest than New York in the determination of whether Aldrich may be restricted from pursuing his profession in California.

D. Would California Law Apply Absent the Choice-of-Law Clause?

The third and final element of the § 187(2)(b) analysis requires a determination of whether the state whose fundamental policy would be offended — California — would be the state of the applicable law in the absence of an effective choice of law by the parties. This determination is made under the "most significant relationship" test set forth in Restatement (Second) of Conflict of Laws § 188.

Section 188 identifies five contacts to be considered in determining the state with the most significant relationship to the transaction and the parties:

(a) The place of contracting. The Employment Agreement was executed in California. Both Aldrich and AMA's signatory executed the Agreement in California. The First Amendment was likewise executed in California. This contact points to California.

(b) The place of negotiation of the contract. All negotiations leading to the execution of the Employment Agreement took place in California. The negotiations regarding the First Amendment also took place in California, through Aldrich's California-based counsel, Laura Kaminski of Kaminski & Associates LLP. This contact points to California.

(c) The place of performance. Aldrich performed all of his services under the Employment Agreement in California, at AMA's West Hollywood and Studio City facilities. There is no evidence that any material performance under the Agreement occurred in New York or any other state. This contact points to California.

(d) The location of the subject matter of the contract. The subject matter of the Employment Agreement is Aldrich's employment relationship with AMA. That employment relationship was centered entirely in California: AMA's principal office is in California, Aldrich's work was performed in California, and AMA's production operations are conducted in California. This contact points to California.

(e) The domicile, residence, nationality, place of incorporation, and place of business of the parties. Aldrich resides in California. AMA's principal place of business is in California (West Hollywood). AMA is incorporated in Delaware — which is neutral, providing no support for either California or New York. AGMG, the parent company, is headquartered in the United Kingdom — also providing no support for New York. None of the parties to the Employment Agreement is domiciled, resident, incorporated, or principally located in New York. This contact points to California (or, at most, is neutral as to New York).

The result of the § 188 analysis is striking in its one-sidedness. All five contacts point to California (or, in the case of AMA's Delaware incorporation, to a state that is neutral rather than supportive of New York). Not a single § 188 factor points to New York. There is no credible argument that New York would be the state of the applicable law in the absence of the contractual choice-of-law clause.

Conclusion: In the absence of the choice-of-law clause, California law would unquestionably govern the Employment Agreement under the "most significant relationship" test of Restatement § 188.

E. Synthesis — Application of § 187(2)(b)

Having analyzed each element of the § 187(2)(b) framework, we now synthesize the results.

All three requirements of § 187(2)(b) are satisfied:

1. Fundamental policy. California's prohibition of non-competition agreements, as set forth in Business and Professions Code Section 16600 and confirmed by the California Supreme Court in Edwards v. Kraft Quill CPAs LLP and the Court of Appeal in Application Group, Inc. v. Hunter Group, Inc., constitutes a "fundamental policy" of the State of California.

2. Materially greater interest. California — as the state of Aldrich's residence, the state in which Aldrich performed all of his services, the state in which AMA maintains its principal office, and the state whose labor market would be directly affected by enforcement of the non-compete — has a "materially greater interest" than New York in the determination of whether Aldrich may be restricted from pursuing his profession.

3. Applicable law absent choice-of-law clause. Under the "most significant relationship" test of Restatement § 188, California would be the state of the applicable law in the absence of the choice-of-law clause. All five § 188 contacts point to California (or are neutral), and none points to New York.

Because all three requirements are met, a California court will decline to enforce the New York choice-of-law clause contained in Section 14.3 of the Employment Agreement as applied to the restrictive covenant provisions in Section 9. The court will instead apply California law to evaluate the enforceability of those provisions — including, most critically, the non-competition clause in Section 9.1, which is void under California Business and Professions Code Section 16600 and Edwards v. Kraft Quill CPAs LLP.

This conclusion is consistent with the holding of Application Group, in which the Court of Appeal refused to apply Maryland law to validate a non-competition agreement against a California-based employee, even though the employment agreement contained an express Maryland choice-of-law clause. 61 Cal.App.4th at 900–04. The factual parallels between Application Group and the present case are strong: in both cases, the employee was based in California, performed services in California, and the chosen state's only connection to the employment relationship was the location of the employer's out-of-state counsel or office.

VI. Treatment of Other Restrictive Covenant Provisions

While the foregoing analysis focuses primarily on the non-competition clause in Section 9.1, the Employment Agreement contains three additional restrictive covenant provisions (Sections 9.2, 9.3, and 9.4) that require separate consideration. The choice-of-law analysis may apply differently to each provision, depending on whether California has a "fundamental policy" that would be offended by the application of New York law to that particular provision.

Section 9.1 (Non-Competition). As set forth above, this provision directly implicates California Business and Professions Code Section 16600 and the fundamental policy analysis under § 187(2)(b). A California court will apply California law, and Section 9.1 is void. The enforceability analysis under California law is set forth in detail in the Companion Memorandum.

Section 9.2 (Non-Solicitation of Employees). California's public policy regarding employee non-solicitation clauses is less settled than its policy regarding non-competition agreements. While some California courts have invalidated broad employee non-solicitation clauses on the ground that they function as de facto non-competes or restrain employees from engaging in their lawful business, others have upheld narrowly tailored employee non-solicitation provisions, particularly where they are limited to active solicitation (as opposed to mere hiring) and do not effectively prevent a former employee from competing. Notwithstanding this unsettled state of the law, the same § 187(2) framework applies, and the same contacts analysis supports the application of California law to this provision. Accordingly, a California court will likely apply California law to Section 9.2 as well. The enforceability of Section 9.2 under California law is analyzed in the Companion Memorandum; our preliminary assessment is that it is likely (though not certainly) enforceable, depending on how the court construes its scope and effect.

Section 9.3 (Non-Solicitation of Business Relationships). A similar analysis applies to Section 9.3. California law will likely govern, and the enforceability of the provision will depend on whether the court concludes that it functions as a de facto non-competition clause or is instead a permissible restraint narrowly targeted at the protection of customer relationships and trade secrets. The analysis is set forth in the Companion Memorandum.

Section 9.4 (Confidentiality). The choice-of-law question is effectively moot with respect to the confidentiality provision. There is no material conflict between New York law and California law regarding the enforceability of reasonable confidentiality obligations. Confidentiality agreements that protect trade secrets, proprietary information, and confidential business data are enforceable under both New York law and California law, including under the California Uniform Trade Secrets Act (Cal. Civ. Code § 3426 et seq.) and under New York common law. Because there is no conflict of law, there is no occasion for the § 187(2)(b) analysis, and the choice-of-law clause is immaterial to the enforceability of Section 9.4.

It bears emphasis that the application of California law to the remaining provisions — Sections 9.2, 9.3, and 9.4 — does not necessarily produce an unfavorable result for AMA. Only Section 9.1 (the non-competition clause) is categorically voided under California law. The remaining provisions may well be enforceable, in whole or in part, under California law, provided they are reasonably tailored and do not function as disguised non-competition restraints.

VII. Counterarguments and Risk Assessment

A. AMA Could Argue New York Law Governs

In the interest of completeness, we identify the principal arguments that AMA could advance in support of applying New York law to the restrictive covenant provisions, together with our assessment of their likelihood of success.

First, AMA could argue that AGMG's New York corporate office, combined with the fact that the Employment Agreement was drafted by New York-based counsel, establishes a sufficient nexus to New York to warrant enforcement of the parties' contractual choice of law. AMA could further contend that AGMG is a global enterprise with a significant New York presence for financial and investor relations purposes, and that the New York choice-of-law clause reflects a legitimate corporate interest in having a uniform body of law govern the company's employment agreements across jurisdictions.

Second, AMA could emphasize that the parties are sophisticated commercial actors who negotiated the choice-of-law clause at arm's length. This argument is strengthened by the fact that the Employment Agreement was amended in August 2020, at which time Aldrich was represented by his own counsel (Laura Kaminski of Kaminski & Associates LLP). AMA could argue that Aldrich — a highly compensated senior executive represented by experienced counsel — knowingly agreed to New York governing law as part of a negotiated package of terms, and that it would be inequitable to permit him to disavow that agreement now.

Third, AMA could invoke New York's interest in the enforcement of commercial contracts and in providing a predictable, stable legal framework for sophisticated commercial parties. AMA could cite Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, in which the California Supreme Court emphasized the importance of honoring parties' contractual choice of law in the commercial context.

Assessment: These arguments are unlikely to succeed in a California court. The weight of authority — particularly Application Group, Inc. v. Hunter Group, Inc. and Edwards v. Kraft Quill CPAs LLP — strongly and consistently favors the application of California law where a California-based employee challenges a non-competition agreement, regardless of the contractual choice-of-law provision. California courts have treated Section 16600 as a non-waivable statutory protection, and have refused to permit parties — even sophisticated, well-counseled parties — to contract around it through a choice-of-law clause.

The Nedlloyd decision, while important in the general choice-of-law context, is distinguishable because it involved a purely commercial dispute between sophisticated business entities regarding the governance of an international joint venture — not a dispute implicating a fundamental policy regarding the enforceability of employment restraints against a California resident worker. The California Supreme Court in Nedlloyd expressly acknowledged that the § 187(2)(b) "fundamental policy" exception remained available in appropriate cases. 3 Cal.4th at 466.

Moreover, the argument that Aldrich "consented" to New York law is unlikely to carry weight. California courts have consistently held that Section 16600 cannot be waived by contract, and the fact that an employee — even a well-compensated, represented employee — agreed to a choice-of-law clause does not alter this analysis. See Edwards, 44 Cal.4th at 945; Application Group, 61 Cal.App.4th at 901–02.

B. Federal Court Authority

We note that some federal courts, particularly in the Ninth Circuit, had previously recognized a narrow restraint or trade secret exception to Section 16600 — that is, an exception permitting non-competition agreements that imposed only a partial restraint on the employee's competitive activities, rather than a complete prohibition. See, e.g., Campbell v. Trustees of Leland Stanford Jr. Univ. (9th Cir. 1987) 817 F.2d 499, 502–03; General Commercial Packaging, Inc. v. TPS Package Engineering, Inc. (N.D. Cal. 1997) 126 F.3d 1131, 1133.

However, the California Supreme Court's decision in Edwards definitively rejected this narrow restraint exception. 44 Cal.4th at 946–48. The Court explained that "[n]oncompetition agreements are invalid under section 16600 in California even if narrowly drawn, unless they fall within the applicable statutory exceptions of sections 16601, 16602, or 16602.5." Id. at 955. Any federal authority predating Edwards that recognized a narrow restraint exception is therefore no longer good law on this point, and should not be relied upon by AMA.

C. Litigation Risk Assessment

Based on our analysis of the applicable legal framework, the relevant factual contacts, and the weight of authority, we assess the litigation risks as follows:

• Probability that a California court applies New York law to the restrictive covenant provisions: Approximately 10–15%. This assessment accounts for the slim possibility that the court could credit AMA's arguments regarding the sophistication of the parties and the legitimate commercial purpose of the choice-of-law clause, or that the court could distinguish the factual record in some unanticipated way. However, the overwhelming weight of authority favors the application of California law on these facts.

• Probability that a California court applies California law and voids § 9.1: Approximately 85–90%. Under California law, the non-competition clause is void per Section 16600 and Edwards.

We further note that the litigation risk of pursuing the New York choice-of-law argument aggressively is very high, not merely because the argument is unlikely to succeed, but because pressing it could undermine AMA's overall credibility with the court. Judge Villanueva is a well-regarded jurist with extensive experience in complex commercial and employment litigation. Advancing an argument that the court is likely to view as an attempt to circumvent settled California law — particularly where the factual connections to New York are as attenuated as they are here — could negatively color the court's perception of AMA's broader litigation posture, including its claims under the confidentiality provision and the California Uniform Trade Secrets Act.

VIII. Implications for Litigation and Settlement Strategy

Based on the foregoing analysis, we make the following recommendations with respect to AMA's litigation and settlement strategy:

1. Do not rely on the New York choice-of-law clause to save the non-compete. The argument that New York law governs the enforceability of the restrictive covenants has a very low probability of success — we estimate approximately 10–15% — and could be perceived by the court as an attempt to circumvent settled California law. Asserting this argument aggressively in the cross-complaint or in motion practice risks undermining AMA's credibility on its stronger claims and could invite an early adverse ruling that sets a negative tone for the remainder of the litigation.

2. In the cross-complaint (to be filed no later than January 20, 2023), focus on claims that do not depend on the enforceability of the non-compete. Specifically, AMA should lead with claims based on the confidentiality provision (Section 9.4) and claims under the California Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq. ("CUTSA"). These claims are strong regardless of the choice-of-law determination, as confidentiality obligations and trade secret protections are enforceable under both New York and California law. AMA has credible evidence that Aldrich retained and may have disclosed proprietary show formats, production budgets, and talent compensation data — claims that do not depend on the enforceability of the non-competition clause and that are well-suited to the relief available under CUTSA, including injunctive relief, compensatory damages, and exemplary damages for willful and malicious misappropriation.

3. In settlement negotiations, be prepared to concede that Section 9.1 is unenforceable. Making this concession early and credibly will build AMA's credibility as a reasonable negotiating partner and will allow AMA to focus the negotiation on obtaining meaningful protections through the confidentiality provision (Section 9.4) and the non-solicitation provisions (Sections 9.2 and 9.3). A structured settlement that includes an enhanced confidentiality agreement, a consent injunction regarding trade secrets, and agreed-upon non-solicitation restrictions (narrowly tailored to withstand California scrutiny) may provide AMA with more practical protection than a contested non-compete would have provided even if enforceable.

4. For future employment agreements with California-based executives, eliminate non-competition clauses entirely. AMA should not include non-competition provisions in employment agreements with California-based employees, as such provisions are void under California law and serve only to create litigation exposure and undermine the enforceability of other, potentially valid provisions in the agreement (under the theory that the entire restrictive covenant section is tainted by the unenforceable non-compete). Instead, AMA should rely on: (a) robust and carefully drafted confidentiality provisions that clearly identify the categories of information protected; (b) trade secret protections under CUTSA, including proper identification and safeguarding of trade secrets during the employment relationship; and (c) carefully tailored non-solicitation clauses that target specific, identified relationships and that are limited in duration and scope to avoid being treated as de facto non-competes. This recommendation is addressed further in the post-engagement compliance recommendations to be prepared following the resolution of the Aldrich matter.

5. Coordinate with the Companion Memorandum. The analysis in this memorandum should be read in conjunction with the Companion Memorandum dated December 20, 2022 (Enforceability of Restrictive Covenants Under Cal. Bus. & Prof. Code § 16600), which addresses the enforceability of each of the four restrictive covenant provisions under California law. Together, these two memoranda provide a unified analysis of the choice-of-law and enforceability questions and should form the basis for AMA's litigation and settlement strategy in the Aldrich matter.

IX. Conclusion

For the reasons set forth above, we conclude as follows:

A California court will almost certainly decline to enforce the New York choice-of-law clause contained in Section 14.3 of the Employment Agreement as applied to the restrictive covenant provisions in Section 9 of the Employment Agreement. The court will instead apply California law, pursuant to the framework set forth in Restatement (Second) of Conflict of Laws § 187(2)(b), because: (1) California has a fundamental policy against the enforcement of non-competition agreements, as embodied in Business and Professions Code Section 16600; (2) California has a materially greater interest than New York in the determination of whether Aldrich may be restricted from pursuing his profession; and (3) California would be the state of the applicable law in the absence of the choice-of-law clause under the "most significant relationship" test of Restatement § 188.

Under California law, the non-competition clause in Section 9.1 of the Employment Agreement is void per California Business and Professions Code Section 16600 and Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937. This conclusion is consistent with the weight of California authority, including Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881 and its progeny.

The remaining restrictive covenant provisions — Sections 9.2 (Employee Non-Solicitation), 9.3 (Business Non-Solicitation), and 9.4 (Confidentiality) — will also be governed by California law, but the outcome under California law is not categorically unfavorable to AMA for those provisions. The enforceability analysis for each provision is set forth in the Companion Memorandum dated December 20, 2022.

AMA's litigation and settlement strategy in the pending matter (Case No. 22STCV41087) should account for this analysis and should prioritize claims based on the confidentiality provision and CUTSA trade secret claims, which are enforceable regardless of the choice-of-law determination.

We are available to discuss this analysis at your earliest convenience and to assist in the preparation of AMA's cross-complaint, which is due to be filed no later than January 20, 2023.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Nadia Petrov Associate Calderwood & Harkness LLP 1999 Avenue of the Stars, Suite 2700 Los Angeles, California 90067 Telephone: (310) 555-8200

Email: npetrov@calderwoodharkness.com

Date: December 22, 2022

cc: Renata Vasquez, Partner, Calderwood & Harkness LLP Devon Archer, Senior Associate, Calderwood & Harkness LLP Bernard Crawford, Partner, Calderwood & Harkness LLP

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT This memorandum is a confidential attorney-client communication and constitutes attorney work product. It is intended solely for the use of the named recipients and may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

Provision	Type	Duration	Scope
§ 9.1	Non-Competition	18 months post-termination	Prohibits employment with or provision of services to any "Competing Enterprise," defined as any entity deriving ≥ 25% of revenue from the production, licensing, or distribution of unscripted/reality television content in North America
§ 9.2	Non-Solicitation of Employees	24 months post-termination	Prohibits direct or indirect solicitation of any AMA employee with whom Aldrich worked or had regular contact within the 12 months preceding termination
§ 9.3	Non-Solicitation of Business Relationships	24 months post-termination	Prohibits direct or indirect solicitation of any network, platform, or advertiser client of AMA with whom Aldrich had "material contact" during the 24 months preceding termination
§ 9.4	Confidentiality	Indefinite (survives termination without limitation)	Covers proprietary content, show formats, production methodologies, revenue data, talent agreements, financial projections, strategic plans, and all other information designated as confidential by AMA or AGMG

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 1999 Avenue of the Stars, Suite 2700 Los Angeles, California 90067 Telephone: (310) 555-8200 Facsimile: (310) 555-8201
MEMORANDUM
TO: Gregory Tanaka, Vice President, Legal & Compliance, Aurelius Media Americas Inc. Philippa Cartwright, General Counsel, Aurelius Global Media Group PLC
FROM: Nadia Petrov
DATE: December 22, 2022
RE: Choice-of-Law Analysis — New York vs. California Governing Law for Aldrich Employment Agreement § 14.3
Matter No.: 1017-00004
I. Issue Presented
You have asked us to analyze whether a California court will enforce the New York choice-of-law clause contained in Section 14.3 of the Employment Agreement between Aurelius Media Americas Inc. ("AMA") and Gavin Aldrich ("Aldrich"), and, if not, the implications of that determination for the enforceability of the restrictive covenant provisions set forth in Section 9 of the Agreement.
Section 14.3 of the Employment Agreement between AMA and Aldrich (dated September 5, 2017, as amended by the First Amendment dated August 1, 2020) provides, in its entirety:
"This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict of laws principles."
The central question presented is whether a California court — specifically, the Superior Court of the State of California, County of Los Angeles, in which AMA's cross-claims against Aldrich are pending (Case No. 22STCV41087, assigned to the Honorable Catherine Villanueva, Department 52) — will honor this New York choice-of-law clause as applied to the restrictive covenant provisions set forth in Section 9 of the Employment Agreement.
The resolution of this threshold question has dispositive consequences for AMA's ability to enforce the non-competition clause contained in Section 9.1 of the Employment Agreement. If New York law governs, the non-competition clause — which imposes an eighteen (18)-month post-termination prohibition on Aldrich's employment with or provision of services to any "Competing Enterprise" (defined as any entity deriving twenty-five percent (25%) or more of its revenue from the production, licensing, or distribution of unscripted or reality television content in North America) — may be enforceable, as New York courts generally enforce reasonable non-competition agreements that protect legitimate business interests, including the protection of trade secrets, confidential information, and client relationships. See, e.g., Vane Kaplan CPAs LLP Seidman v. Hirshberg, 93 N.Y.2d 382, 388–89 (1999); Predding, Roberts Assocs., Inc. v. Strauman, 40 N.Y.2d 303, 307 (1976).
Conversely, if California law governs, the non-competition clause is almost certainly void. California Business and Professions Code Section 16600 provides that, with narrow statutory exceptions not applicable here, "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." The California Supreme Court's landmark decision in Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937 removed any remaining ambiguity regarding the breadth of Section 16600's prohibition, holding that it voids all non-competition agreements except those falling within the narrow statutory exceptions set forth in Sections 16601 (sale of goodwill of a business), 16602 (dissolution of a partnership), and 16602.5 (dissolution or sale of an interest in a limited liability company). Id. at 945–46.
This analysis has direct bearing on AMA's cross-claims against Aldrich in the pending litigation and on the overall litigation and settlement strategy going forward.
II. Summary of Restrictive Covenant Provisions at Issue
Section 9 of the Employment Agreement contains four distinct restrictive covenant provisions, each of which presents a separate enforceability question under California law. These provisions are summarized in the table below:
The enforceability of each of these provisions under California law is addressed in detail in the companion memorandum dated December 20, 2022, entitled Enforceability of Restrictive Covenants Under Cal. Bus. & Prof. Code § 16600 (the "Companion Memorandum"). This memorandum focuses solely on the threshold choice-of-law question — that is, whether a California court will apply New York law or California law to evaluate the enforceability of these provisions.
III. Factual Background Relevant to Choice-of-Law Analysis
The following factual background is drawn from the Employment Agreement, the First Amendment, publicly available corporate filings, discovery materials produced to date, and information provided by the client. The facts are presented here to the extent relevant to the choice-of-law analysis under the Restatement (Second) of Conflict of Laws.
A. Aurelius Global Media Group PLC
Aurelius Global Media Group PLC ("AGMG") is a United Kingdom-headquartered public limited company incorporated in England and Wales under the Companies Act 2006 (Companies House No. 08412667). AGMG's corporate headquarters are located at 34 Kingsway, London WC2B 6EX, United Kingdom. AGMG's ordinary shares are listed on the London Stock Exchange under the ticker symbol "AGMG." As of November 1, 2022, AGMG's market capitalization was approximately £3.82 billion (approximately $4.41 billion at prevailing exchange rates). For fiscal year 2022, AGMG reported consolidated revenue of approximately £2.14 billion (approximately $2.47 billion). AGMG maintains a global headcount of approximately 18,500 employees across 14 countries, with its largest operational presence in the United Kingdom, the United States, Australia, and Germany. Sir Edmund Halesworth serves as Chief Executive Officer, and Malcolm Dunmore serves as Chief Financial Officer.
AGMG maintains a small corporate office in New York, New York, which serves primarily as a hub for investor relations, financial operations, and coordination with AGMG's external auditor, Graystone & Parr LLP, headquartered at 200 Park Avenue, Suite 3500, New York, New York 10166. The New York office does not serve as a center for AGMG's media production, content licensing, or distribution activities, which are managed through AGMG's operating subsidiaries in their respective territories.
B. Aurelius Media Americas Inc.
Aurelius Media Americas Inc. ("AMA") is a wholly owned subsidiary of AGMG. AMA is incorporated in the State of Delaware (Secretary of State File No. 5284731) and is qualified to do business in the State of California. AMA's principal office is located at 8500 Sunset Boulevard, Suite 1400, West Hollywood, California 90069. AMA's California registered agent for service of process is Pacific Statutory Agents Inc., located at 2901 W. Alameda Avenue, Suite 200, Burbank, California 91505.
AMA maintains approximately 3,200 employees in the United States, of whom approximately 2,400 (or approximately 75%) are based in California. AMA's United States revenue for fiscal year 2022 was approximately $687.4 million. AMA's operations are focused on the production, licensing, and distribution of unscripted and reality television content for major broadcast networks and streaming platforms. Jonathan Mercer serves as President of AMA.
It is significant for purposes of this analysis that AMA is incorporated in Delaware, not New York. AMA does not maintain a principal office, branch office, or production facility in the State of New York. AMA does not employ any production personnel in New York.
C. Gavin Aldrich
Gavin Aldrich served as Senior Vice President of Original Content and Executive Producer at AMA from September 5, 2017, through October 14, 2022, a period of approximately five years and one month. At the time of his termination, Aldrich's base salary was $485,000 per year, exclusive of production bonuses, equity incentive compensation, and other benefits. Aldrich resides at 1140 Tower Road, Beverly Hills, California 90210, and has resided in California continuously since at least 2012 — predating his employment with AMA by approximately five years.
During the course of his employment, Aldrich was responsible for overseeing AMA's slate of unscripted and reality television programming, managing fourteen (14) show units, supervising approximately 120 direct and indirect reports (all California-based), and maintaining relationships with key network and platform buyers. Aldrich was credited as Executive Producer on several of AMA's highest-rated series, including programs broadcast on major broadcast networks and streaming platforms.
D. The Employment Agreement
The Employment Agreement was executed on September 5, 2017, in connection with Aldrich's commencement of employment with AMA. All negotiations leading to the execution of the Employment Agreement took place in California, and the Employment Agreement was signed by Aldrich in California. AMA's signatory, then-President Margaret Liu, also executed the Agreement in California.
On August 1, 2020, the parties executed the First Amendment to the Employment Agreement, which modified Aldrich's compensation structure, extended the term of the Agreement, and made certain other changes. The First Amendment was negotiated through Aldrich's then-counsel, Laura Kaminski of Kaminski & Associates LLP, a Los Angeles-based entertainment law firm. All negotiations relating to the First Amendment took place in California. Critically, the First Amendment did not modify Section 14.3 (the choice-of-law clause) or any of the restrictive covenant provisions in Section 9.
The Employment Agreement was drafted by AGMG's New York-based outside employment counsel, Whitfield & Crane LLP, located at 787 Seventh Avenue, New York, New York 10019. This drafting connection represents one of the few links between the Employment Agreement and the State of New York.
E. Aldrich's Work Location
Throughout his entire tenure with AMA, Aldrich was based exclusively in California. He performed substantially all of his duties and responsibilities from AMA's California facilities, principally the West Hollywood headquarters at 8500 Sunset Boulevard, Suite 1400, and AMA's production facility at 4024 Penmark Strategy Partners Avenue, Studio City, California 91604. Aldrich managed California-based production operations across AMA's fourteen (14) show units, all of which operated under applicable California wage and hour requirements, including Industrial Welfare Commission ("IWC") Wage Order No. 12 (Motion Picture Industry). There is no evidence in the record that Aldrich was ever asked to relocate to New York, that Aldrich maintained an office or workspace in New York, or that Aldrich traveled to New York for any purpose other than occasional industry events and periodic meetings with AGMG corporate leadership.
F. Connection to New York
The connections between the Employment Agreement and the State of New York are limited to the following: (1) AGMG maintains a small corporate office in New York for investor relations and financial operations; (2) the Employment Agreement was drafted by AGMG's New York-based outside employment counsel; and (3) AGMG's external auditor, Graystone & Parr LLP, is headquartered in New York. AMA itself is not a New York corporation, does not maintain offices in New York, does not employ production personnel in New York, and does not derive any meaningful portion of its revenue from New York-based operations. AGMG, the parent company, is a United Kingdom entity, not a New York entity.
G. Aldrich's Anticipated Future Employment
Aldrich resides in California, and his professional network and the broader unscripted and reality television industry are predominantly centered in Los Angeles, California. The evidence indicates that Aldrich's future employment will be located in California or will otherwise significantly affect California's labor market. Indeed, Aldrich has already been reported by industry trade publications as being in discussions with at least two Los Angeles-based production companies regarding senior creative and executive producer roles.
IV. Applicable Legal Framework
A. California's Approach to Contractual Choice-of-Law Clauses
California courts apply the analytical framework set forth in the Restatement (Second) of Conflict of Laws § 187 to determine whether to honor a contractual choice-of-law provision that selects the law of another state. See Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, 464–66; Washington Mutual Bank, FA v. Superior Court (2001) 24 Cal.4th 906, 916–17. The California Supreme Court has expressly adopted the Restatement framework as the governing standard for evaluating contractual choice-of-law clauses. Nedlloyd, 3 Cal.4th at 464–65.
The Restatement (Second) of Conflict of Laws § 187 draws a critical distinction between two categories of contractual issues:
Section 187(1) provides that, if the particular issue is one that the parties could have resolved by an explicit provision in the agreement directed to that issue, the law of the state chosen by the parties to govern their contractual rights and duties will be applied. In other words, where the parties are free to determine the issue by agreement — such as the measure of damages, the manner of performance, or the interpretation of contract terms — the court will generally honor their contractual choice of law, subject only to the requirement that the chosen state have some substantial relationship to the parties or the transaction, or that there be some other reasonable basis for the choice.
Section 187(2) provides a more searching analysis for issues that the parties could not have resolved by an explicit provision in the agreement — that is, issues that implicate regulatory policies or third-party interests beyond the private contractual relationship. Even where there is a substantial relationship between the chosen state and the parties or the transaction, the law of the chosen state will not be applied if:
(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice; or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.
The § 187(2)(b) analysis thus requires a court to evaluate three distinct elements: (i) whether the law of the chosen state is contrary to a fundamental policy of another state; (ii) whether that other state has a materially greater interest than the chosen state in the determination of the particular issue; and (iii) whether that other state would be the state of the applicable law in the absence of the choice-of-law clause, under the "most significant relationship" test of Restatement § 188. All three elements must be satisfied before the court will decline to honor the parties' contractual choice of law.
B. Distinction Between § 187(1) and § 187(2)
The threshold question in the analysis is whether the enforceability of restrictive covenant provisions — particularly non-competition clauses — falls within § 187(1) (issues that parties could have resolved by explicit agreement) or § 187(2) (issues implicating regulatory policy that parties cannot freely waive by contract).
This question has been definitively resolved by California courts. The enforceability of restrictive covenants, and in particular non-competition agreements, implicates California's strong regulatory policy favoring employee mobility and open competition. This policy is embodied in Business and Professions Code Section 16600, which reflects the state's legislative judgment regarding the appropriate balance between the interests of employers in protecting their competitive advantages and the interests of employees in pursuing their chosen professions without unreasonable restraint. See Edwards v. Kraft Quill CPAs LLP, 44 Cal.4th at 945 (describing § 16600 as reflecting California's "strong public policy" in favor of open competition and employee mobility); Advanced Bionics Corp. v. Harborview Corporation, Inc. (2002) 29 Cal.4th 697, 706 (same).
Because the enforceability of non-competition agreements is a matter of regulatory policy — one that implicates not merely the private rights of the contracting parties but also the broader public interest in a competitive labor market — the § 187(2) analysis governs. The parties cannot, by contractual agreement, waive the protections afforded by Section 16600 any more than they could waive other non-waivable statutory protections of the California Labor Code.
Accordingly, the analysis that follows focuses on the requirements of § 187(2)(b), which is the dispositive inquiry for restrictive covenant provisions.
V. Analysis
A. Does New York Have a Substantial Relationship to the Parties or Transaction?
The first question under § 187(2) is whether the chosen state — here, New York — has a "substantial relationship to the parties or the transaction," or whether there is some "other reasonable basis for the parties' choice." Restatement (Second) of Conflict of Laws § 187(2)(a).
The connections between the Employment Agreement and the State of New York are as follows:
1.  AGMG (the parent entity, not the employer) maintains a small corporate office in New York, which serves as a hub for investor relations and financial operations. This office is not involved in AGMG's or AMA's content production, licensing, or distribution activities and is not the location at which any decision relating to Aldrich's employment was made.
2.  The Employment Agreement was drafted by Whitfield & Crane LLP, AGMG's New York-based outside employment counsel. The fact that the drafter of the Agreement was located in New York does not, in and of itself, establish a meaningful connection between the substantive terms of the Employment Agreement and the State of New York. The choice to retain New York counsel appears to have been driven by AGMG's pre-existing relationship with Whitfield & Crane, not by any substantive connection between the employment relationship and New York.
3.  AMA is incorporated in Delaware, not New York. AGMG itself is incorporated in England and Wales. Neither the employer nor the parent entity is a New York corporation or maintains its principal place of business in New York.
4.  AGMG's external auditor, Graystone & Parr LLP, is headquartered in New York. This connection has no relevance to the employment relationship between AMA and Aldrich.
These connections to New York are, by any measure, tenuous. AMA — the actual employer and party to the Employment Agreement — has no New York office, no New York employees, no New York production facilities, and no New York incorporation. AGMG's small New York office, while providing some geographical link to the State of New York, does not transform what is fundamentally a California employment relationship into one with a meaningful New York nexus.
That said, courts applying § 187(2)(a) have at times accepted relatively limited connections as sufficient to establish a "substantial relationship." For example, some courts have found a substantial relationship where a party's place of incorporation or principal office is located in the chosen state, even where the actual performance of the contract occurs elsewhere. See, e.g., Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th at 467 (finding a substantial relationship where the chosen state was the home of one of the contracting parties). Under this permissive standard, AMA could argue that AGMG's New York office — combined with the New York drafting connection — provides a sufficient basis for the choice-of-law designation.
However, even assuming arguendo that New York has a "substantial relationship" to the parties or the transaction sufficient to satisfy § 187(2)(a), the analysis does not end there. The critical inquiry is whether the requirements of § 187(2)(b) are met — that is, whether the application of New York law would be contrary to a fundamental policy of California, whether California has a materially greater interest than New York, and whether California law would apply in the absence of the choice-of-law clause. As set forth below, all three requirements are satisfied, and it is on prong (b) that AMA's argument for New York law fails decisively.
B. Does California Have a Fundamental Policy Against Non-Competes?
The first element of the § 187(2)(b) analysis requires a determination of whether the law of the chosen state (New York) is "contrary to a fundamental policy" of another state (California). The answer here is unequivocal.
California Business and Professions Code Section 16600 provides:
"Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
Section 16600 has been part of California law since the enactment of the Civil Code of 1872. Its roots trace to an even earlier California statute, the Act Concerning Monopolies (1850). It represents one of the most deeply embedded and long-standing legislative policies in California jurisprudence.
The California Supreme Court has repeatedly confirmed that Section 16600 embodies a "strong public policy" of the State of California. In Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, the Court issued a definitive pronouncement regarding the scope and force of Section 16600. The Court held that Section 16600 voids all non-competition agreements except those falling within the narrow statutory exceptions set forth in Sections 16601, 16602, and 16602.5 — which apply only to the sale of the goodwill of a business, the dissolution of a partnership, or the dissolution or sale of a membership interest in a limited liability company, respectively. Id. at 945–46. The Court expressly rejected the so-called "narrow restraint" exception — under which some lower courts and federal courts had previously held that Section 16600 permitted non-competition agreements that imposed only a partial restraint on the employee's ability to practice his or her profession. Id. at 946–48. The Court explained that Section 16600 "protects Californians and ensures 'that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice.'" Id. at 945 (quoting Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 859).
In Advanced Bionics Corp. v. Harborview Corporation, Inc. (2002) 29 Cal.4th 697, 706, the California Supreme Court similarly confirmed that California's prohibition against non-competition agreements reflects a "strong, settled public policy" of the state.
Most directly relevant to the choice-of-law question presented here, the California Court of Appeal's decision in Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, squarely held that California's prohibition of non-competition agreements constitutes a "fundamental policy" for purposes of the Restatement § 187(2) analysis. In Application Group, the Court of Appeal considered whether a Maryland choice-of-law clause in an employment agreement could be used to enforce a non-competition covenant against a California-based employee. The court held that it could not, explaining:
"California has a strong public policy against noncompetition agreements. . . . Under the Restatement approach, if enforcement of the chosen state's law on a particular issue would be contrary to a fundamental policy of the state that has a materially greater interest in the issue, the chosen state's law will not be applied."
Application Group, 61 Cal.App.4th at 900–02. The court further held that California's interest in protecting the employment mobility of its residents constitutes not merely a "policy" but a "fundamental policy" — one that cannot be overridden by a contractual choice-of-law clause. Id. at 902.
This line of authority has been consistently applied by California courts in the decades since Application Group was decided. California courts have refused to apply out-of-state law to validate non-competition agreements against California-based employees in a range factual contexts. See, e.g., Kolani v. Gluska (1998) 64 Cal.App.4th 402, 407 (applying § 16600 regardless of choice-of-law provision); The CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1240 (reaffirming that § 16600 is a fundamental policy).
It is also worth noting, for purposes of identifying the trajectory of California's public policy in this area, that the California Legislature has enacted Assembly Bill 1076 (AB 1076), codified as Cal. Bus. & Prof. Code § 16600.5, which takes effect on January 1, 2024. Section 16600.5 expressly prohibits employers from entering into or attempting to enforce any non-compete clause or non-compete agreement, regardless of whether the contract was signed, and regardless of whether the employment was maintained, outside of California. Although AB 1076 was not yet in effect at the time of Aldrich's termination (October 14, 2022) and does not directly govern the present dispute, it reinforces the unmistakable legislative trend toward ever-stronger protection of California workers against non-competition restraints, and it further underscores the fundamental nature of California's policy against non-competes.
Conclusion: California's policy against the enforcement of non-competition agreements is unquestionably a "fundamental policy" of the State of California within the meaning of Restatement (Second) of Conflict of Laws § 187(2)(b). This element is clearly satisfied.
C. Does California Have a Materially Greater Interest Than New York?
The second element of the § 187(2)(b) analysis requires a determination of whether the state whose fundamental policy would be offended — here, California — has a "materially greater interest" than the chosen state — here, New York — in the determination of the particular issue.
The contacts connecting the Employment Agreement, the parties, and the employment relationship to California are overwhelming:
•  Aldrich is a California resident. He resides at 1140 Tower Road, Beverly Hills, California 90210, and has resided in California continuously since at least 2012.
•  Aldrich performed all of his services in California. Throughout his entire five-year tenure with AMA, Aldrich worked exclusively from AMA's California facilities — principally the West Hollywood headquarters and the Studio City production facility. He was never asked to relocate to New York, was never provided an office or workspace in New York, and traveled to New York only occasionally for industry events and corporate meetings.
•  AMA's principal office is in California. AMA operates from 8500 Sunset Boulevard, Suite 1400, West Hollywood, California 90069. Approximately 75% of AMA's United States employees are California-based.
•  Aldrich's future employment will be in California. The unscripted and reality television industry is predominantly based in Los Angeles, California. Aldrich's professional network, industry contacts, and employment prospects are centered in California. Enforcement of the non-competition clause would directly restrain Aldrich's ability to earn a livelihood in California's entertainment industry.
•  California has a direct sovereign interest in the employment mobility of its residents. The California Legislature has made a considered policy judgment — embodied in Section 16600 and repeatedly affirmed by the California courts — that California workers should be free to pursue their chosen professions without contractual restraint. This interest is at its zenith when the affected employee is a California resident performing services in California.
By contrast, New York's connections to this dispute are attenuated at best:
•  Neither Aldrich nor AMA is based in New York. Aldrich does not reside in New York, has never resided in New York, and has no plans to work in New York. AMA does not maintain offices, production facilities, or employees in New York.
•  AMA is a Delaware corporation, not a New York corporation. AGMG, the parent company, is a United Kingdom entity, not a New York entity.
•  AGMG's New York office is a small investor relations and financial operations hub with no connection to AMA's content production operations or to Aldrich's employment.
•  The only New York connection of any significance is that the Employment Agreement was drafted by New York-based outside counsel. This drafting connection does not create a meaningful New York interest in the enforceability of the restrictive covenants.
New York's interest in this dispute is, at most, a generalized interest in the enforcement of commercial contracts. While that interest is real, it is not specific to the particular issue at hand — the enforceability of a non-competition restraint against a California-based employee working in California for a company headquartered in California. California's interest, by contrast, is specific, concrete, and directly implicated by the facts of this case: it is the interest of the state in ensuring that its residents are not prevented from earning a livelihood in the state's dominant industry.
The Application Group court directly addressed this comparative interest analysis in the context of a similar factual pattern — an out-of-state employer seeking to enforce a non-competition agreement against a California-based employee through a contractual choice-of-law clause — and concluded that California's interest was materially greater than the interest of the chosen state. 61 Cal.App.4th at 901–02. The same result follows here.
Conclusion: California has a materially greater interest than New York in the determination of whether Aldrich may be restricted from pursuing his profession in California.
D. Would California Law Apply Absent the Choice-of-Law Clause?
The third and final element of the § 187(2)(b) analysis requires a determination of whether the state whose fundamental policy would be offended — California — would be the state of the applicable law in the absence of an effective choice of law by the parties. This determination is made under the "most significant relationship" test set forth in Restatement (Second) of Conflict of Laws § 188.
Section 188 identifies five contacts to be considered in determining the state with the most significant relationship to the transaction and the parties:
(a) The place of contracting. The Employment Agreement was executed in California. Both Aldrich and AMA's signatory executed the Agreement in California. The First Amendment was likewise executed in California. This contact points to California.
(b) The place of negotiation of the contract. All negotiations leading to the execution of the Employment Agreement took place in California. The negotiations regarding the First Amendment also took place in California, through Aldrich's California-based counsel, Laura Kaminski of Kaminski & Associates LLP. This contact points to California.
(c) The place of performance. Aldrich performed all of his services under the Employment Agreement in California, at AMA's West Hollywood and Studio City facilities. There is no evidence that any material performance under the Agreement occurred in New York or any other state. This contact points to California.
(d) The location of the subject matter of the contract. The subject matter of the Employment Agreement is Aldrich's employment relationship with AMA. That employment relationship was centered entirely in California: AMA's principal office is in California, Aldrich's work was performed in California, and AMA's production operations are conducted in California. This contact points to California.
(e) The domicile, residence, nationality, place of incorporation, and place of business of the parties. Aldrich resides in California. AMA's principal place of business is in California (West Hollywood). AMA is incorporated in Delaware — which is neutral, providing no support for either California or New York. AGMG, the parent company, is headquartered in the United Kingdom — also providing no support for New York. None of the parties to the Employment Agreement is domiciled, resident, incorporated, or principally located in New York. This contact points to California (or, at most, is neutral as to New York).
The result of the § 188 analysis is striking in its one-sidedness. All five contacts point to California (or, in the case of AMA's Delaware incorporation, to a state that is neutral rather than supportive of New York). Not a single § 188 factor points to New York. There is no credible argument that New York would be the state of the applicable law in the absence of the contractual choice-of-law clause.
Conclusion: In the absence of the choice-of-law clause, California law would unquestionably govern the Employment Agreement under the "most significant relationship" test of Restatement § 188.
E. Synthesis — Application of § 187(2)(b)
Having analyzed each element of the § 187(2)(b) framework, we now synthesize the results.
All three requirements of § 187(2)(b) are satisfied:
1.  Fundamental policy. California's prohibition of non-competition agreements, as set forth in Business and Professions Code Section 16600 and confirmed by the California Supreme Court in Edwards v. Kraft Quill CPAs LLP and the Court of Appeal in Application Group, Inc. v. Hunter Group, Inc., constitutes a "fundamental policy" of the State of California.
2.  Materially greater interest. California — as the state of Aldrich's residence, the state in which Aldrich performed all of his services, the state in which AMA maintains its principal office, and the state whose labor market would be directly affected by enforcement of the non-compete — has a "materially greater interest" than New York in the determination of whether Aldrich may be restricted from pursuing his profession.
3.  Applicable law absent choice-of-law clause. Under the "most significant relationship" test of Restatement § 188, California would be the state of the applicable law in the absence of the choice-of-law clause. All five § 188 contacts point to California (or are neutral), and none points to New York.
Because all three requirements are met, a California court will decline to enforce the New York choice-of-law clause contained in Section 14.3 of the Employment Agreement as applied to the restrictive covenant provisions in Section 9. The court will instead apply California law to evaluate the enforceability of those provisions — including, most critically, the non-competition clause in Section 9.1, which is void under California Business and Professions Code Section 16600 and Edwards v. Kraft Quill CPAs LLP.
This conclusion is consistent with the holding of Application Group, in which the Court of Appeal refused to apply Maryland law to validate a non-competition agreement against a California-based employee, even though the employment agreement contained an express Maryland choice-of-law clause. 61 Cal.App.4th at 900–04. The factual parallels between Application Group and the present case are strong: in both cases, the employee was based in California, performed services in California, and the chosen state's only connection to the employment relationship was the location of the employer's out-of-state counsel or office.
VI. Treatment of Other Restrictive Covenant Provisions
While the foregoing analysis focuses primarily on the non-competition clause in Section 9.1, the Employment Agreement contains three additional restrictive covenant provisions (Sections 9.2, 9.3, and 9.4) that require separate consideration. The choice-of-law analysis may apply differently to each provision, depending on whether California has a "fundamental policy" that would be offended by the application of New York law to that particular provision.
Section 9.1 (Non-Competition). As set forth above, this provision directly implicates California Business and Professions Code Section 16600 and the fundamental policy analysis under § 187(2)(b). A California court will apply California law, and Section 9.1 is void. The enforceability analysis under California law is set forth in detail in the Companion Memorandum.
Section 9.2 (Non-Solicitation of Employees). California's public policy regarding employee non-solicitation clauses is less settled than its policy regarding non-competition agreements. While some California courts have invalidated broad employee non-solicitation clauses on the ground that they function as de facto non-competes or restrain employees from engaging in their lawful business, others have upheld narrowly tailored employee non-solicitation provisions, particularly where they are limited to active solicitation (as opposed to mere hiring) and do not effectively prevent a former employee from competing. Notwithstanding this unsettled state of the law, the same § 187(2) framework applies, and the same contacts analysis supports the application of California law to this provision. Accordingly, a California court will likely apply California law to Section 9.2 as well. The enforceability of Section 9.2 under California law is analyzed in the Companion Memorandum; our preliminary assessment is that it is likely (though not certainly) enforceable, depending on how the court construes its scope and effect.
Section 9.3 (Non-Solicitation of Business Relationships). A similar analysis applies to Section 9.3. California law will likely govern, and the enforceability of the provision will depend on whether the court concludes that it functions as a de facto non-competition clause or is instead a permissible restraint narrowly targeted at the protection of customer relationships and trade secrets. The analysis is set forth in the Companion Memorandum.
Section 9.4 (Confidentiality). The choice-of-law question is effectively moot with respect to the confidentiality provision. There is no material conflict between New York law and California law regarding the enforceability of reasonable confidentiality obligations. Confidentiality agreements that protect trade secrets, proprietary information, and confidential business data are enforceable under both New York law and California law, including under the California Uniform Trade Secrets Act (Cal. Civ. Code § 3426 et seq.) and under New York common law. Because there is no conflict of law, there is no occasion for the § 187(2)(b) analysis, and the choice-of-law clause is immaterial to the enforceability of Section 9.4.
It bears emphasis that the application of California law to the remaining provisions — Sections 9.2, 9.3, and 9.4 — does not necessarily produce an unfavorable result for AMA. Only Section 9.1 (the non-competition clause) is categorically voided under California law. The remaining provisions may well be enforceable, in whole or in part, under California law, provided they are reasonably tailored and do not function as disguised non-competition restraints.
VII. Counterarguments and Risk Assessment
A. AMA Could Argue New York Law Governs
In the interest of completeness, we identify the principal arguments that AMA could advance in support of applying New York law to the restrictive covenant provisions, together with our assessment of their likelihood of success.
First, AMA could argue that AGMG's New York corporate office, combined with the fact that the Employment Agreement was drafted by New York-based counsel, establishes a sufficient nexus to New York to warrant enforcement of the parties' contractual choice of law. AMA could further contend that AGMG is a global enterprise with a significant New York presence for financial and investor relations purposes, and that the New York choice-of-law clause reflects a legitimate corporate interest in having a uniform body of law govern the company's employment agreements across jurisdictions.
Second, AMA could emphasize that the parties are sophisticated commercial actors who negotiated the choice-of-law clause at arm's length. This argument is strengthened by the fact that the Employment Agreement was amended in August 2020, at which time Aldrich was represented by his own counsel (Laura Kaminski of Kaminski & Associates LLP). AMA could argue that Aldrich — a highly compensated senior executive represented by experienced counsel — knowingly agreed to New York governing law as part of a negotiated package of terms, and that it would be inequitable to permit him to disavow that agreement now.
Third, AMA could invoke New York's interest in the enforcement of commercial contracts and in providing a predictable, stable legal framework for sophisticated commercial parties. AMA could cite Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, in which the California Supreme Court emphasized the importance of honoring parties' contractual choice of law in the commercial context.
Assessment: These arguments are unlikely to succeed in a California court. The weight of authority — particularly Application Group, Inc. v. Hunter Group, Inc. and Edwards v. Kraft Quill CPAs LLP — strongly and consistently favors the application of California law where a California-based employee challenges a non-competition agreement, regardless of the contractual choice-of-law provision. California courts have treated Section 16600 as a non-waivable statutory protection, and have refused to permit parties — even sophisticated, well-counseled parties — to contract around it through a choice-of-law clause.
The Nedlloyd decision, while important in the general choice-of-law context, is distinguishable because it involved a purely commercial dispute between sophisticated business entities regarding the governance of an international joint venture — not a dispute implicating a fundamental policy regarding the enforceability of employment restraints against a California resident worker. The California Supreme Court in Nedlloyd expressly acknowledged that the § 187(2)(b) "fundamental policy" exception remained available in appropriate cases. 3 Cal.4th at 466.
Moreover, the argument that Aldrich "consented" to New York law is unlikely to carry weight. California courts have consistently held that Section 16600 cannot be waived by contract, and the fact that an employee — even a well-compensated, represented employee — agreed to a choice-of-law clause does not alter this analysis. See Edwards, 44 Cal.4th at 945; Application Group, 61 Cal.App.4th at 901–02.
B. Federal Court Authority
We note that some federal courts, particularly in the Ninth Circuit, had previously recognized a narrow restraint or trade secret exception to Section 16600 — that is, an exception permitting non-competition agreements that imposed only a partial restraint on the employee's competitive activities, rather than a complete prohibition. See, e.g., Campbell v. Trustees of Leland Stanford Jr. Univ. (9th Cir. 1987) 817 F.2d 499, 502–03; General Commercial Packaging, Inc. v. TPS Package Engineering, Inc. (N.D. Cal. 1997) 126 F.3d 1131, 1133.
However, the California Supreme Court's decision in Edwards definitively rejected this narrow restraint exception. 44 Cal.4th at 946–48. The Court explained that "[n]oncompetition agreements are invalid under section 16600 in California even if narrowly drawn, unless they fall within the applicable statutory exceptions of sections 16601, 16602, or 16602.5." Id. at 955. Any federal authority predating Edwards that recognized a narrow restraint exception is therefore no longer good law on this point, and should not be relied upon by AMA.
C. Litigation Risk Assessment
Based on our analysis of the applicable legal framework, the relevant factual contacts, and the weight of authority, we assess the litigation risks as follows:
•  Probability that a California court applies New York law to the restrictive covenant provisions: Approximately 10–15%. This assessment accounts for the slim possibility that the court could credit AMA's arguments regarding the sophistication of the parties and the legitimate commercial purpose of the choice-of-law clause, or that the court could distinguish the factual record in some unanticipated way. However, the overwhelming weight of authority favors the application of California law on these facts.
•  Probability that a California court applies California law and voids § 9.1: Approximately 85–90%. Under California law, the non-competition clause is void per Section 16600 and Edwards.
We further note that the litigation risk of pursuing the New York choice-of-law argument aggressively is very high, not merely because the argument is unlikely to succeed, but because pressing it could undermine AMA's overall credibility with the court. Judge Villanueva is a well-regarded jurist with extensive experience in complex commercial and employment litigation. Advancing an argument that the court is likely to view as an attempt to circumvent settled California law — particularly where the factual connections to New York are as attenuated as they are here — could negatively color the court's perception of AMA's broader litigation posture, including its claims under the confidentiality provision and the California Uniform Trade Secrets Act.
VIII. Implications for Litigation and Settlement Strategy
Based on the foregoing analysis, we make the following recommendations with respect to AMA's litigation and settlement strategy:
1. Do not rely on the New York choice-of-law clause to save the non-compete. The argument that New York law governs the enforceability of the restrictive covenants has a very low probability of success — we estimate approximately 10–15% — and could be perceived by the court as an attempt to circumvent settled California law. Asserting this argument aggressively in the cross-complaint or in motion practice risks undermining AMA's credibility on its stronger claims and could invite an early adverse ruling that sets a negative tone for the remainder of the litigation.
2. In the cross-complaint (to be filed no later than January 20, 2023), focus on claims that do not depend on the enforceability of the non-compete. Specifically, AMA should lead with claims based on the confidentiality provision (Section 9.4) and claims under the California Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq. ("CUTSA"). These claims are strong regardless of the choice-of-law determination, as confidentiality obligations and trade secret protections are enforceable under both New York and California law. AMA has credible evidence that Aldrich retained and may have disclosed proprietary show formats, production budgets, and talent compensation data — claims that do not depend on the enforceability of the non-competition clause and that are well-suited to the relief available under CUTSA, including injunctive relief, compensatory damages, and exemplary damages for willful and malicious misappropriation.
3. In settlement negotiations, be prepared to concede that Section 9.1 is unenforceable. Making this concession early and credibly will build AMA's credibility as a reasonable negotiating partner and will allow AMA to focus the negotiation on obtaining meaningful protections through the confidentiality provision (Section 9.4) and the non-solicitation provisions (Sections 9.2 and 9.3). A structured settlement that includes an enhanced confidentiality agreement, a consent injunction regarding trade secrets, and agreed-upon non-solicitation restrictions (narrowly tailored to withstand California scrutiny) may provide AMA with more practical protection than a contested non-compete would have provided even if enforceable.
4. For future employment agreements with California-based executives, eliminate non-competition clauses entirely. AMA should not include non-competition provisions in employment agreements with California-based employees, as such provisions are void under California law and serve only to create litigation exposure and undermine the enforceability of other, potentially valid provisions in the agreement (under the theory that the entire restrictive covenant section is tainted by the unenforceable non-compete). Instead, AMA should rely on: (a) robust and carefully drafted confidentiality provisions that clearly identify the categories of information protected; (b) trade secret protections under CUTSA, including proper identification and safeguarding of trade secrets during the employment relationship; and (c) carefully tailored non-solicitation clauses that target specific, identified relationships and that are limited in duration and scope to avoid being treated as de facto non-competes. This recommendation is addressed further in the post-engagement compliance recommendations to be prepared following the resolution of the Aldrich matter.
5. Coordinate with the Companion Memorandum. The analysis in this memorandum should be read in conjunction with the Companion Memorandum dated December 20, 2022 (Enforceability of Restrictive Covenants Under Cal. Bus. & Prof. Code § 16600), which addresses the enforceability of each of the four restrictive covenant provisions under California law. Together, these two memoranda provide a unified analysis of the choice-of-law and enforceability questions and should form the basis for AMA's litigation and settlement strategy in the Aldrich matter.
IX. Conclusion
For the reasons set forth above, we conclude as follows:
A California court will almost certainly decline to enforce the New York choice-of-law clause contained in Section 14.3 of the Employment Agreement as applied to the restrictive covenant provisions in Section 9 of the Employment Agreement. The court will instead apply California law, pursuant to the framework set forth in Restatement (Second) of Conflict of Laws § 187(2)(b), because: (1) California has a fundamental policy against the enforcement of non-competition agreements, as embodied in Business and Professions Code Section 16600; (2) California has a materially greater interest than New York in the determination of whether Aldrich may be restricted from pursuing his profession; and (3) California would be the state of the applicable law in the absence of the choice-of-law clause under the "most significant relationship" test of Restatement § 188.
Under California law, the non-competition clause in Section 9.1 of the Employment Agreement is void per California Business and Professions Code Section 16600 and Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937. This conclusion is consistent with the weight of California authority, including Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881 and its progeny.
The remaining restrictive covenant provisions — Sections 9.2 (Employee Non-Solicitation), 9.3 (Business Non-Solicitation), and 9.4 (Confidentiality) — will also be governed by California law, but the outcome under California law is not categorically unfavorable to AMA for those provisions. The enforceability analysis for each provision is set forth in the Companion Memorandum dated December 20, 2022.
AMA's litigation and settlement strategy in the pending matter (Case No. 22STCV41087) should account for this analysis and should prioritize claims based on the confidentiality provision and CUTSA trade secret claims, which are enforceable regardless of the choice-of-law determination.
We are available to discuss this analysis at your earliest convenience and to assist in the preparation of AMA's cross-complaint, which is due to be filed no later than January 20, 2023.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Nadia Petrov Associate Calderwood & Harkness LLP 1999 Avenue of the Stars, Suite 2700 Los Angeles, California 90067 Telephone: (310) 555-8200
Email: npetrov@calderwoodharkness.com
Date: December 22, 2022
cc: Renata Vasquez, Partner, Calderwood & Harkness LLP Devon Archer, Senior Associate, Calderwood & Harkness LLP Bernard Crawford, Partner, Calderwood & Harkness LLP
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT This memorandum is a confidential attorney-client communication and constitutes attorney work product. It is intended solely for the use of the named recipients and may not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
Provision | Type | Duration | Scope
§ 9.1 | Non-Competition | 18 months post-termination | Prohibits employment with or provision of services to any "Competing Enterprise," defined as any entity deriving ≥ 25% of revenue from the production, licensing, or distribution of unscripted/reality television content in North America
§ 9.2 | Non-Solicitation of Employees | 24 months post-termination | Prohibits direct or indirect solicitation of any AMA employee with whom Aldrich worked or had regular contact within the 12 months preceding termination
§ 9.3 | Non-Solicitation of Business Relationships | 24 months post-termination | Prohibits direct or indirect solicitation of any network, platform, or advertiser client of AMA with whom Aldrich had "material contact" during the 24 months preceding termination
§ 9.4 | Confidentiality | Indefinite (survives termination without limitation) | Covers proprietary content, show formats, production methodologies, revenue data, talent agreements, financial projections, strategic plans, and all other information designated as confidential by AMA or AGMG

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MEMORANDUM

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