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

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CALDERWOOD & HARKNESS LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017

CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the use of the addressees identified below. Any disclosure, distribution, or copying of this memorandum or its contents without the express written consent of Calderwood & Harkness LLP is strictly prohibited.

MEMORANDUM

TO: Gregory Tanaka, Vice President, Legal & Compliance, Aldrich Media Associates, Inc. ("AMA"); Philippa Cartwright, General Counsel, Apex Global Media Group ("AGMG")

FROM: Nadia Petrov, Associate, Calderwood & Harkness LLP

DATE: December 20, 2022

RE: Enforceability of Restrictive Covenant Provisions in Aldrich Employment Agreement Under Cal. Bus. & Prof. Code § 16600

I. Issue Presented

AMA has requested that this firm analyze whether the restrictive covenant provisions contained in Section 9 of the Employment Agreement between AMA and Gavin Aldrich, dated September 5, 2017, as amended by the First Amendment to Employment Agreement dated August 1, 2020 (collectively, the "Employment Agreement"), are enforceable under California law. This memorandum addresses the enforceability of each of the four restrictive covenant provisions set forth in Sections 9.1 through 9.4 of the Employment Agreement.

The following facts are relevant to this analysis and have been confirmed by AMA's Legal & Compliance department:

Gavin Aldrich ("Aldrich") was based in California throughout the entirety of his employment with AMA. His principal office was located at AMA's West Hollywood headquarters at 8500 Sunset Boulevard, Suite 1400, West Hollywood, California 90069. During the course of his employment, Aldrich performed substantially all of his services from this location and from various production sites within the State of California in his capacity as Senior Vice President of Original Content & Executive Producer. Aldrich's employment with AMA was terminated "for cause" on October 14, 2022, pursuant to the terms of the Employment Agreement.

It is expected that Aldrich will challenge—and, indeed, has since challenged—the enforceability of the restrictive covenant provisions in the Employment Agreement. On December 9, 2022, Aldrich filed a Complaint for Declaratory Relief and related claims in the Superior Court of the State of California, County of Los Angeles, Case No. 22STCV41087, assigned to the Honorable Catherine Villanueva, Department 52 (the "Aldrich Action"). Among other things, the Aldrich Action seeks a judicial declaration that the restrictive covenants in Section 9 of the Employment Agreement are void and unenforceable under California Business & Professions Code Section 16600.

This memorandum provides our assessment of the enforceability of each provision under California law and offers strategic recommendations for AMA's response to the Aldrich Action and for any cross-claims AMA may elect to pursue. A separate memorandum, to be provided under cover date of December 22, 2022, will address the choice-of-law question arising under Section 14.3 of the Employment Agreement, which contains a New York choice-of-law clause. The analysis herein assumes that California law governs the enforceability of the restrictive covenants—a conclusion that we believe is highly likely to be reached by the court in the Aldrich Action and that is discussed in detail in the companion memorandum.

II. Summary of Restrictive Covenant Provisions

Section 9 of the Employment Agreement contains four separate restrictive covenant provisions. For convenience, those provisions are summarized in the table below:

The Employment Agreement was originally executed on September 5, 2017, in connection with Aldrich's hiring as Vice President of Unscripted Programming. On August 1, 2020, the parties executed the First Amendment to Employment Agreement in connection with Aldrich's promotion to Senior Vice President of Original Content & Executive Producer, effective January 1, 2020. The First Amendment principally addressed compensation adjustments, expanded title and responsibilities, and the addition of executive producer credit on specified AMA productions. Critically, the First Amendment did not materially alter the restrictive covenant provisions in Section 9. The non-competition, non-solicitation, and confidentiality obligations remained substantively unchanged from the original agreement. Accordingly, the analysis below applies equally to the original and amended versions of the Employment Agreement.

III. Analysis

We address each of the four restrictive covenant provisions in turn, beginning with the provision most clearly vulnerable to challenge and concluding with the provision most likely to be enforced.

A. Non-Competition Clause (§ 9.1) — Almost Certainly Void

1. Governing Statute: California Business & Professions Code § 16600

The analysis of the non-competition clause begins and, in large measure, ends with California Business & Professions Code Section 16600. Section 16600 provides, in its entirety:

"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."

Cal. Bus. & Prof. Code § 16600.

This provision has been in continuous effect, in substantially the same form, since 1872, when it was originally enacted as Section 1673 of the California Civil Code. It reflects a deeply embedded and longstanding public policy of the State of California favoring open competition, employee mobility, and the free pursuit of lawful employment. As the California Supreme Court has observed, Section 16600 "represents a strong public policy of the State of California" and reflects the state's determination "that California's public policy in favor of open competition outweigh[s] any benefits of protecting an employer's interest in restricting competition by former employees." Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, 946 (internal citations omitted).

2. Key Precedent: *Edwards v. Kraft Quill CPAs LLP*

The controlling California Supreme Court decision on the enforceability of non-competition agreements in the employment context is Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937. In Edwards, the Court addressed the enforceability of a restrictive covenant contained in an employment agreement that prohibited the employee from working for a competing firm or soliciting clients of the firm following termination. The Court's analysis and holding are directly relevant to Section 9.1 of the Aldrich Employment Agreement.

In Edwards, the California Supreme Court held that Section 16600 invalidates non-competition agreements except for three narrow statutory exceptions specifically enumerated in the Business & Professions Code:

• Section 16601 — Sale of Business Goodwill: Permits a non-compete in connection with the sale of the goodwill of a business or the sale of all or substantially all of the operating assets of a business, or the sale of an ownership interest in a partnership or limited liability company;

• Section 16602 — Dissolution of Partnership: Permits a non-compete in connection with the dissolution of or dissociation from a partnership; and

• Section 16602.5 — Dissolution of LLC: Permits a non-compete in connection with the dissolution of or the termination of a membership interest in a limited liability company.

Edwards, 44 Cal.4th at 944–46.

None of these statutory exceptions applies to Aldrich's employment relationship with AMA. Aldrich was an employee of AMA. He did not sell a business to AMA, did not transfer business goodwill, and did not dissolve or dissociate from a partnership or limited liability company in connection with the Employment Agreement. The Employment Agreement is a straightforward employment contract, and the non-competition clause in Section 9.1 is a classic post-termination non-compete restraint in the employment context. There is no statutory basis for enforcing it under Sections 16601, 16602, or 16602.5.

Significantly, the Edwards Court expressly rejected the so-called "narrow restraint" or "trade secret" exception that some federal courts, most notably the Ninth Circuit in Campbell v. Trustees of Leland Stanford Jr. University (9th Cir. 1987) 817 F.2d 499, had previously recognized. Under that now-rejected approach, a non-competition agreement could be enforced if it was narrowly tailored and was reasonably necessary to protect the employer's trade secrets. The California Supreme Court squarely held that this approach was inconsistent with the plain text of Section 16600:

"[Section] 16600 is unambiguous, and if the Legislature intended the statute to apply only to unreasonable restraints, as the Ninth Circuit suggests, it could have included language to that effect. . . . We reject [the] narrow-restraint exception to section 16600 and hold that the statute prohibits employee noncompetition agreements unless the agreement falls within a statutory exception."

Edwards, 44 Cal.4th at 945–46.

The Court further emphasized the policy rationale underlying Section 16600, stating:

"Section 16600 protects Californians and ensures 'that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice.' It protects 'the important legal right of persons to engage in businesses and occupations of their choosing.'"

Edwards, 44 Cal.4th at 945, 947 (quoting Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 859, and Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1520).

Edwards has been consistently followed by California courts and has been cited in numerous subsequent decisions as establishing the definitive rule that employee non-competition agreements are void under California law absent one of the three enumerated statutory exceptions. See, e.g., Ashbury Partners LLC (2009) 179 Cal.App.4th 564, 574–75 (applying Edwards to invalidate post-employment non-competition restriction); The Retirement Group v. Galante (2009) 176 Cal.App.4th 1226, 1237 (same).

3. Section 9.1 Is Clearly a Restraint on Competition Prohibited by § 16600

Section 9.1 of the Employment Agreement prohibits Aldrich from accepting employment with, rendering services to, or holding any ownership interest in any "Competing Enterprise" for a period of eighteen months following termination. The definition of "Competing Enterprise" is broad: it encompasses any entity that derives twenty-five percent (25%) or more of its annual gross revenue from the production, licensing, or distribution of unscripted or reality television content in North America.

This provision is precisely the type of restraint that Section 16600 was designed to prohibit. Aldrich's entire professional career has been in the unscripted television industry. He has spent approximately fifteen years developing expertise in the production, development, and licensing of unscripted and reality programming. The definition of "Competing Enterprise" in the Employment Agreement would encompass virtually every major production company and studio in the unscripted television space, including (by way of example and not limitation) Severin Group, Cobalt Ridge & Co., Harborline Industries, Halcyon Enterprises, Ridgeline Partners LLC, and numerous mid-size and boutique production companies. Enforcement of Section 9.1 would effectively bar Aldrich from working in his chosen field for a period of eighteen months—a result that Section 16600 categorically forbids.

We note that even if Section 9.1 were analyzed under a "reasonableness" standard (which, as discussed above, is not the correct standard under California law post-Edwards), the clause would face serious challenges. The eighteen-month duration is lengthy; the geographic scope (all of North America) is expansive; and the revenue-based definition of "Competing Enterprise" (≥ 25% of revenue from unscripted content) sweeps broadly enough to capture entities that are not direct competitors of AMA. However, these reasonableness concerns are academic under California law, because the threshold question is dispositive: Section 16600 renders the clause void, full stop.

4. Upcoming Legislation Reinforcing Public Policy

Although not yet in effect at the time of Aldrich's termination or the filing of the Aldrich Action, two pieces of pending California legislation will further reinforce the public policy underpinning Section 16600 and the Edwards holding:

Assembly Bill 1076 (AB 1076): Effective January 1, 2024, AB 1076 will add Section 16600.5 to the Business & Professions Code. Section 16600.5 will expressly provide that any contract that is void under Section 16600 is "unenforceable regardless of where and when the contract was signed." It will further require employers to notify current and former employees in writing that any non-compete clause or agreement to which the employee is subject is void. While AB 1076 does not change the substantive rule of Section 16600, it provides express statutory confirmation that the prohibition on non-competes applies without regard to the place of execution of the agreement or the location of the employer's headquarters—a point that is directly relevant to the choice-of-law issues addressed in the companion memorandum.

Senate Bill 699 (SB 699): Also effective January 1, 2024, SB 699 will add Section 16600.7 to the Business & Professions Code. Section 16600.7 will prohibit any employer from entering into or attempting to enforce a non-compete agreement with an employee who works in California, regardless of whether the agreement was signed in another state or is governed by the law of another state. SB 699 goes further than AB 1076 by expressly creating a cause of action for employees harmed by the enforcement of void non-compete agreements, including the right to recover actual damages, injunctive relief, and reasonable attorney's fees.

While neither AB 1076 nor SB 699 is yet in effect and therefore does not govern the Aldrich dispute directly, the enactment of these statutes underscores the depth and strength of California's public policy against non-competition restraints. A court considering the enforceability of Section 9.1 in the Aldrich Action would likely be aware of these legislative developments and may view them as further confirmation of the state's unwavering commitment to employee mobility and competition.

5. Conclusion on § 9.1

The non-competition clause in Section 9.1 of the Employment Agreement is void and unenforceable under California Business & Professions Code Section 16600, as interpreted by the California Supreme Court in Edwards v. Kraft Quill CPAs LLP. No statutory exception to Section 16600 applies to Aldrich's employment relationship with AMA, and the clause constitutes a classic post-termination restraint on competition that is categorically prohibited under California law.

We strongly recommend that AMA not attempt to enforce Section 9.1 against Aldrich in the Aldrich Action or in any other forum. Any cross-complaint filed by AMA in the Aldrich Action should not seek injunctive relief or damages based on Section 9.1. To the extent AMA seeks to protect its legitimate business interests against Aldrich's post-termination conduct, AMA should rely on the confidentiality provision in Section 9.4 and on trade secret protections available under the California Uniform Trade Secrets Act ("CUTSA"), California Civil Code Section 3426 et seq., as discussed in Section III.D below.

B. Non-Solicitation of Employees (§ 9.2) — Likely Enforceable

1. General Principle

California courts have generally drawn a distinction between non-competition clauses (which restrain the departing employee from competing in his or her chosen profession) and employee non-solicitation clauses (which merely restrict the departing employee from affirmatively targeting and poaching the former employer's workforce). While the line between the two is not always bright, the prevailing weight of California authority holds that employee non-solicitation clauses do not constitute restraints on trade or employment within the meaning of Section 16600, provided they are reasonably tailored and do not function as de facto non-competition provisions.

2. Favorable Authority

The leading case supporting the enforceability of employee non-solicitation clauses in California is Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268. In Loral, the California Court of Appeal upheld a covenant that restricted a departing employee from soliciting the employer's employees to leave the employer's service. The court reasoned that such a restriction "does not prohibit [the departing employee] from engaging in his profession, trade, or business; it merely restricts him from soliciting fellow employees to leave [the employer]." Loral, 174 Cal.App.3d at 276.

The Loral court's analysis rests on a common-sense distinction: an employee non-solicitation clause does not prevent the departing employee from pursuing his or her trade or profession. The departing employee remains free to seek employment wherever he or she chooses, to compete with the former employer, and to use his or her general skills and knowledge. The clause merely imposes a targeted restriction on one specific type of conduct—affirmatively recruiting the former employer's employees—that implicates the employer's legitimate interest in workforce stability, recruitment costs, and the preservation of institutional knowledge and team cohesion.

Employee non-solicitation clauses serve a well-recognized protective function. Employers invest significant resources in recruiting, training, and developing their employees. When a senior executive departs and systematically raids the employer's workforce, the resulting disruption can be severe—particularly in an industry like unscripted television, where production teams are assembled over long periods and the loss of key creative and operational personnel can jeopardize active and development-stage productions. The employee non-solicitation clause protects against this specific harm without imposing the broader competitive restraint that Section 16600 is designed to prevent.

3. Potentially Adverse Authority

We note, however, that the enforceability of employee non-solicitation clauses in California is not entirely settled. In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, the California Court of Appeal questioned whether broader employee non-solicitation clauses might run afoul of Section 16600 in certain contexts. In AMN Healthcare, the clause at issue broadly restricted the departing employee from soliciting the employer's temporary staffing employees—who numbered in the thousands and who were placed with third-party healthcare facilities. The court expressed concern that the clause, as applied in the staffing industry, functioned as a de facto non-compete because the "employees" subject to the non-solicitation restriction were, in economic substance, the employer's "product" and customer relationships.

The AMN Healthcare decision introduced a degree of uncertainty into the analysis. However, we believe that the decision is distinguishable from the present situation on several grounds:

First, the AMN Healthcare clause was far broader than Section 9.2 of the Aldrich Employment Agreement. The clause in AMN Healthcare covered all of the employer's staffing employees—a category numbering in the thousands—and was not limited to employees with whom the departing employee had a working relationship. By contrast, Section 9.2 is limited to AMA employees with whom Aldrich worked, collaborated, or had a reporting relationship during the twelve months preceding his termination.

Second, the staffing industry context in AMN Healthcare was unusual. The court's concern was that, in the staffing industry, "employees" are functionally equivalent to the employer's inventory or product—the company's business is placing those employees with clients. Soliciting those employees is, in economic reality, equivalent to soliciting the employer's clients and competing directly with the employer. The unscripted television production industry does not present the same dynamic. AMA's employees are its workforce, not its product.

Third, the AMN Healthcare court did not issue a categorical holding that all employee non-solicitation clauses are void under Section 16600. The decision was fact-specific and did not overrule Loral. Indeed, the AMN Healthcare court acknowledged the continued vitality of Loral and distinguished it on the facts.

4. Assessment of § 9.2

Section 9.2 of the Employment Agreement prohibits Aldrich from directly or indirectly soliciting, recruiting, inducing, or encouraging any AMA employee with whom Aldrich worked within the twelve months preceding termination to leave AMA's employment. The duration of the restriction is twenty-four months.

We assess Section 9.2 as likely enforceable for the following reasons:

Reasonable scope: The clause is limited to employees with whom Aldrich had an actual working relationship during a defined twelve-month look-back period. It does not sweep broadly across all of AMA's employees. Given AMA's headcount of approximately 430 full-time employees across multiple divisions, the clause likely covers a subset of employees in the unscripted programming division and related functions—perhaps 50 to 80 individuals—with whom Aldrich interacted in his capacity as SVP.

Does not restrain competition: The clause does not prevent Aldrich from working in the unscripted television industry, from competing with AMA, or from hiring individuals who are not AMA employees. It addresses only the targeted solicitation of a defined group of AMA employees. This is precisely the type of narrow restriction that the Loral court held was not a restraint on trade or employment under Section 16600.

Legitimate employer interest: Given Aldrich's senior position as SVP overseeing the entire unscripted programming division, he developed close working relationships with key creative talent, production staff, and operational personnel. AMA has a legitimate and substantial interest in protecting against the disruption that would result from targeted poaching of its workforce by a former senior executive who has intimate knowledge of the skills, compensation, and career aspirations of these employees.

Duration: The twenty-four-month duration is at the longer end of what courts have accepted, and there is some risk that a court might view it as excessive. However, it is not unprecedented, and courts have upheld non-solicitation restrictions of comparable duration in the context of senior executives. We note that if a court were to narrow the provision, the most likely adjustment would be a reduction in the duration from twenty-four months to twelve months, rather than complete invalidation of the clause.

5. Conclusion on § 9.2

Section 9.2 is likely enforceable under California law, though not entirely free from challenge in light of the uncertainty introduced by AMN Healthcare. We recommend that AMA assert Section 9.2 in any cross-complaint filed in the Aldrich Action and that AMA include the employee non-solicitation restriction as a key component of its settlement negotiation position. AMA should be prepared for the possibility that the court may narrow the clause—for example, by reducing the duration from twenty-four months to twelve months—but should not assume that the clause will be struck down entirely.

In the event that evidence emerges that Aldrich has in fact solicited or recruited AMA employees since his termination, AMA should move promptly to seek preliminary injunctive relief to enforce Section 9.2. We are monitoring this situation and will advise further as information becomes available.

C. Non-Solicitation of Business Relationships (§ 9.3) — Vulnerable

1. General Principle

Customer or client non-solicitation clauses occupy a more uncertain position under California law than employee non-solicitation clauses. California courts have been increasingly skeptical of such clauses, particularly where they function as de facto non-competition provisions by effectively precluding the former employee from working in his or her industry. The distinction turns on the practical impact of the clause: if the universe of potential clients is so limited, or if the departing employee's client relationships are so extensive, that the non-solicitation restriction effectively bars the employee from competing, then the clause may be treated as a non-compete and struck down under Section 16600.

2. Adverse Authority

The principal adverse authority is The Retirement Group v. Galante (2009) 176 Cal.App.4th 1226. In Galante, the Court of Appeal struck down a client non-solicitation clause as overly broad and unenforceable under Section 16600. The clause at issue prohibited the departing employee from soliciting any client of the employer for a specified period following termination. The court found that the clause effectively precluded the former employee from working in his field because "most potential clients were clients of [the employer]." Galante, 176 Cal.App.4th at 1239. In the court's view, the practical effect of the clause was indistinguishable from a non-compete: the former employee could not practice his profession without soliciting the employer's clients, because the employer's client base covered substantially all of the relevant market.

Other California courts have expressed similar concerns. In Ashbury Partners LLC (2009) 179 Cal.App.4th 564, the court invalidated restrictive covenants that, taken together, effectively prevented the employee from competing in his industry. Courts have consistently emphasized that employers may not achieve through indirect contractual mechanisms what Section 16600 forbids them from achieving directly—that is, preventing a former employee from competing.

3. Favorable Authority

On the other hand, some California courts have upheld narrowly drawn client non-solicitation provisions, particularly where the clause is limited to clients with whom the departing employee had a direct and substantial relationship and where the scope of the restriction does not foreclose the employee from competing generally. See, e.g., Marlowe Corporation v. Cascade Capital Markets (N.D. Cal. 2010) 2010 WL 546497 (noting that a narrowly tailored customer non-solicitation provision might survive scrutiny under Section 16600 where it does not effectively preclude the employee from competing). The key factor in the analysis is whether the restriction, as applied, functions as a restraint on the employee's ability to pursue his or her profession—or whether it merely targets specific, identifiable conduct (soliciting a defined group of clients) while leaving the employee free to compete for new business.

4. Assessment of § 9.3

Section 9.3 of the Employment Agreement prohibits Aldrich from directly or indirectly soliciting or diverting any business from any "network, platform, or advertiser client" of AMA with whom Aldrich had "material contact" during the twenty-four-month period immediately preceding termination. We assess this provision as moderately to significantly vulnerable to challenge under California law for the following reasons:

Breadth of scope: The clause covers "any network, platform, or advertiser client" of AMA with whom Aldrich had "material contact" over a twenty-four-month look-back period. Given Aldrich's senior position as SVP of Original Content, he was one of AMA's primary client-facing executives. He was directly involved in pitching content to, negotiating deals with, and managing relationships with the vast majority of AMA's key clients. Based on information provided by AMA, Aldrich had material contact during the relevant period with at least the following categories of clients: major broadcast networks (Dunmore Industries, Ridgeway Enterprises, ABC, Fox); cable networks (Bravo, Harborline & Co., Hollowell Partners LLC, Ashford Corporation, TLC); streaming platforms (Northgate Partners LLC, Dunmore Corporation, Dunmore Enterprises, Bramwell & Co., Fenmore Holdings, Ashford & Co.); and approximately fifteen to twenty major advertising partners and brand integration clients.

De facto non-compete effect: The unscripted television industry is characterized by a relatively concentrated buyer market. The networks, cable channels, and streaming platforms listed above represent the overwhelming majority of the buyers of unscripted and reality television content in North America. If Aldrich is prohibited from soliciting business from all of these entities for a period of twenty-four months, he is effectively prohibited from selling or pitching unscripted content to any significant buyer—which is, functionally, a prohibition on competing. This is precisely the scenario that concerned the court in Galante: a non-solicitation clause that, in practical effect, operates as a non-compete because the universe of potential clients is coextensive with the former employer's client base.

Duration: The twenty-four-month duration compounds the vulnerability. Even if the scope of the restriction were narrower, a twenty-four-month prohibition on client solicitation is aggressive and increases the likelihood that a court will view the clause as unreasonable or as a de facto restraint on competition.

Definition of "material contact": The definition of "material contact" in the Employment Agreement—any in-person meeting, substantive telephone call, or substantive written communication regarding the business relationship—is sufficiently broad that it could capture a very large number of client relationships. At Aldrich's level of seniority, virtually any business communication with a client would constitute "material contact" under this definition.

5. Conclusion on § 9.3

Section 9.3 is moderately to significantly vulnerable to challenge under California law. A California court may well conclude that the clause, as drafted and as applied to Aldrich's specific circumstances, functions as a de facto non-compete and is therefore void under Section 16600. The breadth of the client universe, the concentrated structure of the unscripted television content buyer market, and the twenty-four-month duration all cut against enforceability.

We recommend that AMA be prepared to narrow Section 9.3 significantly in settlement discussions—for example, by reducing the duration from twenty-four months to twelve months and narrowing the scope to clients with whom Aldrich served as the primary relationship holder (as distinguished from clients with whom he merely had "material contact"). AMA should not rely on Section 9.3 as a primary enforcement tool in the cross-complaint. If AMA does assert Section 9.3, it should be positioned as a secondary claim, and AMA should be prepared for the possibility that the court will decline to enforce it.

D. Confidentiality (§ 9.4) — Enforceable

1. General Principle

Confidentiality obligations are analytically and legally distinct from non-competition and non-solicitation provisions. A confidentiality obligation does not restrain the employee from engaging in a lawful profession, trade, or business; it merely prohibits the employee from using or disclosing the former employer's proprietary and confidential information. As such, confidentiality provisions do not implicate Section 16600 and are generally enforceable under California law.

This principle is well established. California courts have consistently held that an employer may contractually require its employees to maintain the confidentiality of proprietary information, trade secrets, and other sensitive business information, and that such obligations survive the termination of the employment relationship. See, e.g., Ashford Group (2002) 101 Cal.App.4th 1443, 1462 (distinguishing trade secret protections from non-compete restraints); Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1526 (recognizing employer's right to protect confidential information through contractual obligations). The critical distinction is that a confidentiality provision protects specific information, whereas a non-compete restricts the employee's ability to work. The former is a targeted protection of a legitimate business interest; the latter is a broad restriction on the employee's freedom of economic action.

2. Scope of § 9.4

Section 9.4 of the Employment Agreement provides that Aldrich shall not, during or after his employment with AMA, directly or indirectly use or disclose any "Confidential Information" of AMA without the prior written consent of AMA's President or General Counsel. "Confidential Information" is defined to include:

• Proprietary content, including content in development and pilot stages;

• Show formats, including format bibles, pitch decks, and sizzle reels;

• Revenue data, including per-episode budgets, licensing fees, and franchise valuations;

• Talent agreements, including compensation structures, deal terms, and option provisions;

• Audience analytics, including viewership data, demographic breakdowns, and platform-specific performance metrics;

• Strategic plans, including content development pipelines, market expansion strategies, and acquisition targets; and

• All other information that AMA has designated as confidential or that by its nature would reasonably be understood to be confidential.

This scope is well within the bounds of protectable interests under California law. Each of these categories constitutes the type of sensitive business information that employers routinely—and properly—seek to protect through contractual confidentiality obligations. The information listed derives its economic value, in whole or in part, from the fact that it is not generally known to AMA's competitors. AMA has taken reasonable steps to maintain the secrecy of this information, including (based on information provided by AMA's Legal & Compliance department):

• Application of confidential watermarks to development-stage and pilot-stage content materials;

• Maintenance of a secure internal content management system with individual login credentials and access controls;

• Adoption and enforcement of an Acceptable Use and Confidentiality Policy (the "Confidentiality Policy"), which Aldrich executed on April 12, 2021;

• Requirement of written authorization from AMA's President or Vice President of Business Affairs for any external transmission of development materials, format bibles, or other pre-release content; and

• Inclusion of confidentiality provisions in the Employment Agreement (Section 9.4) and in the Confidentiality Policy.

3. CUTSA — Independent Statutory Protection

In addition to the contractual confidentiality obligation in Section 9.4, AMA has an independent statutory basis for protecting its trade secrets under the California Uniform Trade Secrets Act ("CUTSA"), California Civil Code Section 3426 et seq. CUTSA defines a "trade secret" as:

"information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

Cal. Civ. Code § 3426.1(d).

Based on the facts as currently understood, the following categories of information that Aldrich is alleged to have improperly transmitted to Halcyon Creek Productions LLC (via email to info@halcyoncreekprod.com) and to his personal email account (galdrich.private@Northgate Software.com) likely qualify as trade secrets under CUTSA:

• Show format bibles for "Apex Endurance," "The Remix," and "Untamed West" — These documents contain the detailed structural frameworks, episode arcs, character archetypes, challenge designs, scoring mechanics, and production methodologies for three of AMA's development-stage or active productions. They are not publicly available and are the product of substantial creative and financial investment by AMA.

• Pilot sizzle reels — Pre-release promotional materials containing proprietary footage, production design, and creative direction for pilots in development. These materials are shared only with potential network and platform buyers under non-disclosure agreements and are not publicly disseminated.

• Summit Challenge revenue model — AMA's proprietary financial model for the "Summit Challenge" franchise, which generates approximately $42 million in annual revenue across domestic and international markets. The model includes per-episode production costs, licensing fee structures, advertiser rate cards, and projected revenue growth. This information is highly sensitive and provides significant competitive advantage.

• Audience analytics — Proprietary viewership data, demographic analyses, and platform-specific performance metrics that AMA uses to inform content development decisions, pricing negotiations, and strategic planning.

• Talent deal terms — Compensation structures, option provisions, and deal terms for on-camera talent and executive producers associated with AMA productions. Disclosure of these terms could undermine AMA's negotiating position in future talent dealings.

Each of these categories satisfies both prongs of the CUTSA trade secret definition: the information derives independent economic value from not being generally known, and AMA has taken reasonable efforts to maintain its secrecy (as detailed in Section III.D.2 above).

CUTSA provides robust remedies for trade secret misappropriation, including injunctive relief (Cal. Civ. Code § 3426.2), actual damages measured by the trade secret owner's loss or the misappropriator's unjust enrichment (Cal. Civ. Code § 3426.3(a)), and, where the misappropriation is willful and malicious, exemplary damages in an amount not exceeding twice the amount of actual damages (Cal. Civ. Code § 3426.3(c)). CUTSA also permits an award of reasonable attorney's fees to the prevailing party in cases involving willful and malicious misappropriation or bad faith claims. Cal. Civ. Code § 3426.4.

4. Enforceability Not Affected by Section 16600

Section 9.4 is not a "restraint" on employment within the meaning of Section 16600. It does not prevent Aldrich from working in the unscripted television industry, from competing with AMA, or from using his general skills, knowledge, and experience. It prohibits only the use or disclosure of specific proprietary information belonging to AMA. This distinction is well recognized in California law. Even if Section 9.1 (the non-competition clause) is void under Section 16600—as we have concluded it almost certainly is—Section 9.4 survives independently. The invalidity of one provision in Section 9 does not infect or invalidate the other provisions; the Employment Agreement contains a severability clause (Section 14.8) that expressly provides for the independent enforceability of each provision.

5. Conclusion on § 9.4

Section 9.4 is enforceable under California law. It should serve as AMA's primary contractual basis for any cross-claims against Aldrich in the Aldrich Action. Combined with independent CUTSA trade secret misappropriation claims, Section 9.4 provides AMA with the strongest available foundation for protecting its legitimate business interests—the protection of its proprietary content, financial models, talent agreements, and strategic information—without running afoul of California's strong public policy against non-competition restraints.

We strongly recommend that AMA's cross-complaint in the Aldrich Action center on breach of Section 9.4 and on CUTSA misappropriation. These claims are well supported by the facts as currently known, are consistent with California law, and position AMA to seek both injunctive relief and damages without the credibility risks associated with attempting to enforce a void non-competition clause.

IV. Summary of Conclusions

The following table summarizes our enforceability assessment and recommendations for each of the four restrictive covenant provisions in Section 9 of the Employment Agreement:

V. Recommendations

Based on the foregoing analysis, we offer the following specific recommendations:

1. Do not attempt to enforce § 9.1 (non-compete). The non-competition clause in Section 9.1 is almost certainly void under California Business & Professions Code Section 16600 and the California Supreme Court's decision in Edwards v. Kraft Quill CPAs LLP. Attempting to enforce this provision would not only be unsuccessful but would also affirmatively undermine AMA's credibility with the court—the Honorable Catherine Villanueva, Department 52, in Case No. 22STCV41087—and with opposing counsel. In our experience, California courts react unfavorably to employers who aggressively pursue enforcement of provisions that are clearly void under controlling authority. Acknowledging the unenforceability of Section 9.1 in settlement discussions will signal to Aldrich's counsel that AMA is approaching the matter in good faith and will focus the negotiations on the issues where AMA has the strongest legal position. Moreover, pursuing Section 9.1 would divert resources from the more productive focus on trade secret protection and confidentiality enforcement.

2. Assert § 9.2 (employee non-solicitation) and § 9.4 (confidentiality) as the primary restrictive covenant bases for cross-claims. These two provisions have the strongest legal foundation under California law and are most directly relevant to the conduct at issue. The employee non-solicitation provision protects AMA's legitimate interest in workforce stability, and the confidentiality provision protects AMA's proprietary information and trade secrets. Both provisions are directly implicated by Aldrich's conduct, including his unauthorized transmission of proprietary materials—specifically, show format bibles, pilot sizzle reels, the Summit Challenge revenue model, audience analytics, and talent deal terms—to Halcyon Creek Productions LLC (via email to info@halcyoncreekprod.com) and to his personal email account (galdrich.private@Northgate Software.com) in the weeks preceding and following his termination.

3. Assert CUTSA trade secret claims as an independent cause of action. The CUTSA trade secret misappropriation claims do not depend on the enforceability of any contractual provision in the Employment Agreement. Even if every provision in Section 9 were invalidated, AMA would retain the right to pursue injunctive relief, actual damages, and exemplary damages under CUTSA based on Aldrich's misappropriation of trade secrets. As discussed in Section III.D.3 above, the information at issue—including the show format bibles for "Apex Endurance," "The Remix," and "Untamed West," the pilot sizzle reels, the Summit Challenge revenue model, and the audience analytics and talent deal terms—likely qualifies as trade secrets under CUTSA. In the event that the misappropriation is found to be willful and malicious, CUTSA authorizes exemplary damages in an amount up to twice the actual damages (Cal. Civ. Code § 3426.3(c)), as well as reasonable attorney's fees (Cal. Civ. Code § 3426.4). The CUTSA claims should be asserted as independent causes of action in AMA's cross-complaint, in addition to the contractual breach claims under Section 9.4.

4. Be prepared to narrow or abandon § 9.3 (client non-solicitation) in settlement. While Section 9.3 may have some value as a negotiating chip, it is the most vulnerable of the four restrictive covenant provisions and is unlikely to survive judicial scrutiny in its current form, given the breadth of client coverage and the concentrated structure of the unscripted television content buyer market. In settlement discussions, AMA should be prepared to offer meaningful concessions on Section 9.3—including reducing the duration from twenty-four months to twelve months, narrowing the scope to clients with whom Aldrich served as the primary relationship holder (rather than any client with whom he had "material contact"), or abandoning the provision entirely—in exchange for strong protections on confidentiality and trade secrets. AMA should not rely on Section 9.3 as a primary enforcement tool in the cross-complaint; if it is asserted, it should be positioned as a secondary claim that AMA is willing to negotiate.

5. Address the choice-of-law issue (§ 14.3) separately. The Employment Agreement contains a New York choice-of-law clause in Section 14.3, and Aldrich's counsel may argue that the restrictive covenants should be governed by New York law, which is more permissive of post-employment restraints than California law. The choice-of-law question is analyzed in detail in the companion memorandum dated December 22, 2022. In summary, a California court is unlikely to enforce the New York choice-of-law clause as applied to the restrictive covenant provisions because California's anti-non-compete policy constitutes a "fundamental policy" under the Restatement (Second) of Conflict of Laws Section 187(2), and California has a materially greater interest than New York in determining whether its resident employees are free to pursue their chosen profession. Aldrich resided and worked in California throughout his employment, performed substantially all of his services in California, and was based at AMA's California office. Under these circumstances, the application of New York law would be contrary to the fundamental policy of California and would not be applied by a California court. AMA should not rely on the choice-of-law clause to salvage the enforceability of Section 9.1, and should not base any portion of its litigation strategy on the assumption that New York law will be applied to the restrictive covenant provisions.

6. Monitor upcoming legislation and conduct a compliance audit. AB 1076 (adding Cal. Bus. & Prof. Code § 16600.5) and SB 699 (adding Cal. Bus. & Prof. Code § 16600.7), both effective January 1, 2024, will further strengthen California's prohibition on non-competition agreements and will impose new obligations on employers, including an affirmative notification requirement. In anticipation of these legislative changes, we recommend that AMA conduct a comprehensive audit of all existing employment agreements with California-based employees and senior executives to identify and remove non-competition clauses prior to the January 1, 2024 effective date. This audit should also assess whether any existing confidentiality, non-solicitation, or intellectual property assignment provisions require updating to ensure compliance with the evolving statutory framework. We will provide a separate compliance recommendation at the conclusion of this engagement, including a template notification letter for affected employees and a revised form of employment agreement reflecting the current state of California law.

We are available to discuss this memorandum and its recommendations at your earliest convenience. Please do not hesitate to contact us with any questions or to schedule a call.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Nadia Petrov Associate

777 South Flower Street, Suite 4200 Los Angeles, California 90017 Telephone: (213) 555-7251

Email: npetrov@calderwoodharkness.com

cc: Calderwood & Harkness LLP file Enclosures: None (companion memorandum re: choice-of-law analysis to follow under separate cover dated December 22, 2022)

Section	Restriction	Duration	Geographic / Subject-Matter Scope
§ 9.1 — Non-Competition	Prohibits Aldrich from accepting employment with, rendering services to, or holding any ownership interest in any "Competing Enterprise"	18 months following the date of termination (regardless of whether termination is for cause, without cause, or by resignation)	A "Competing Enterprise" is defined as any entity that derives twenty-five percent (25%) or more of its annual gross revenue from the production, licensing, or distribution of unscripted or reality television content in North America
§ 9.2 — Non-Solicitation of Employees	Prohibits Aldrich from directly or indirectly soliciting, recruiting, inducing, or encouraging any employee of AMA to leave AMA's employment	24 months following the date of termination	Limited to AMA employees with whom Aldrich worked, collaborated, or had a reporting relationship at any time during the 12-month period immediately preceding the date of termination
§ 9.3 — Non-Solicitation of Business Relationships	Prohibits Aldrich from directly or indirectly soliciting or diverting any business from any network, platform, advertiser, or other client of AMA	24 months following the date of termination	Limited to clients with whom Aldrich had "material contact" during the 24-month period immediately preceding the date of termination; "material contact" is defined as any in-person meeting, substantive telephone call, or substantive written communication regarding the business relationship
§ 9.4 — Confidentiality	Prohibits Aldrich from using or disclosing any "Confidential Information" of AMA	Indefinite; survives termination of employment regardless of reason	Covers proprietary content (including development-stage and pilot-stage programming), show formats (including format bibles, pitch decks, and sizzle reels), revenue data, talent agreements, compensation structures, audience analytics, strategic plans, and all other information that AMA has designated as confidential or that by its nature would reasonably be understood to be confidential
Provision	Enforceability Assessment	Recommendation
§ 9.1 — Non-Competition (18 months)	Almost certainly void under Cal. Bus. & Prof. Code § 16600 and Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937. No statutory exception applies.	Do not attempt to enforce. Acknowledge unenforceability in settlement discussions to build credibility with opposing counsel and the court. Redirect enforcement strategy toward § 9.4 and CUTSA claims.
§ 9.2 — Employee Non-Solicitation (24 months)	Likely enforceable under Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, though subject to some uncertainty following AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923. Clause is reasonably narrow and does not function as a de facto non-compete.	Assert in cross-complaint and settlement negotiations. Be prepared for potential judicial narrowing of the duration (e.g., from 24 to 12 months). Monitor for evidence of actual solicitation by Aldrich.
§ 9.3 — Business Non-Solicitation (24 months)	Vulnerable. Significant risk of being struck down as a de facto non-compete under The Retirement Group v. Galante (2009) 176 Cal.App.4th 1226, given the breadth of client coverage and the concentrated structure of the unscripted television buyer market.	Be prepared to narrow or abandon in settlement discussions. Do not rely as a primary enforcement tool in the cross-complaint. Consider offering concessions on § 9.3 to strengthen negotiating position on § 9.4 and trade secret claims.
§ 9.4 — Confidentiality (indefinite)	Enforceable. Not a restraint on trade or employment under § 16600. Well within the scope of protectable interests. Supported by AMA's reasonable secrecy measures.	Primary contractual basis for cross-claims. Supplement with independent CUTSA trade secret misappropriation claims. Seek injunctive relief and damages.

CALDERWOOD & HARKNESS LLP 777 South Flower Street, Suite 4200 Los Angeles, California 90017
CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGED / ATTORNEY WORK PRODUCT This memorandum is a privileged and confidential attorney-client communication and attorney work product. It is intended solely for the use of the addressees identified below. Any disclosure, distribution, or copying of this memorandum or its contents without the express written consent of Calderwood & Harkness LLP is strictly prohibited.
MEMORANDUM
TO: Gregory Tanaka, Vice President, Legal & Compliance, Aldrich Media Associates, Inc. ("AMA"); Philippa Cartwright, General Counsel, Apex Global Media Group ("AGMG")
FROM: Nadia Petrov, Associate, Calderwood & Harkness LLP
DATE: December 20, 2022
RE: Enforceability of Restrictive Covenant Provisions in Aldrich Employment Agreement Under Cal. Bus. & Prof. Code § 16600
I. Issue Presented
AMA has requested that this firm analyze whether the restrictive covenant provisions contained in Section 9 of the Employment Agreement between AMA and Gavin Aldrich, dated September 5, 2017, as amended by the First Amendment to Employment Agreement dated August 1, 2020 (collectively, the "Employment Agreement"), are enforceable under California law. This memorandum addresses the enforceability of each of the four restrictive covenant provisions set forth in Sections 9.1 through 9.4 of the Employment Agreement.
The following facts are relevant to this analysis and have been confirmed by AMA's Legal & Compliance department:
Gavin Aldrich ("Aldrich") was based in California throughout the entirety of his employment with AMA. His principal office was located at AMA's West Hollywood headquarters at 8500 Sunset Boulevard, Suite 1400, West Hollywood, California 90069. During the course of his employment, Aldrich performed substantially all of his services from this location and from various production sites within the State of California in his capacity as Senior Vice President of Original Content & Executive Producer. Aldrich's employment with AMA was terminated "for cause" on October 14, 2022, pursuant to the terms of the Employment Agreement.
It is expected that Aldrich will challenge—and, indeed, has since challenged—the enforceability of the restrictive covenant provisions in the Employment Agreement. On December 9, 2022, Aldrich filed a Complaint for Declaratory Relief and related claims in the Superior Court of the State of California, County of Los Angeles, Case No. 22STCV41087, assigned to the Honorable Catherine Villanueva, Department 52 (the "Aldrich Action"). Among other things, the Aldrich Action seeks a judicial declaration that the restrictive covenants in Section 9 of the Employment Agreement are void and unenforceable under California Business & Professions Code Section 16600.
This memorandum provides our assessment of the enforceability of each provision under California law and offers strategic recommendations for AMA's response to the Aldrich Action and for any cross-claims AMA may elect to pursue. A separate memorandum, to be provided under cover date of December 22, 2022, will address the choice-of-law question arising under Section 14.3 of the Employment Agreement, which contains a New York choice-of-law clause. The analysis herein assumes that California law governs the enforceability of the restrictive covenants—a conclusion that we believe is highly likely to be reached by the court in the Aldrich Action and that is discussed in detail in the companion memorandum.
II. Summary of Restrictive Covenant Provisions
Section 9 of the Employment Agreement contains four separate restrictive covenant provisions. For convenience, those provisions are summarized in the table below:
The Employment Agreement was originally executed on September 5, 2017, in connection with Aldrich's hiring as Vice President of Unscripted Programming. On August 1, 2020, the parties executed the First Amendment to Employment Agreement in connection with Aldrich's promotion to Senior Vice President of Original Content & Executive Producer, effective January 1, 2020. The First Amendment principally addressed compensation adjustments, expanded title and responsibilities, and the addition of executive producer credit on specified AMA productions. Critically, the First Amendment did not materially alter the restrictive covenant provisions in Section 9. The non-competition, non-solicitation, and confidentiality obligations remained substantively unchanged from the original agreement. Accordingly, the analysis below applies equally to the original and amended versions of the Employment Agreement.
III. Analysis
We address each of the four restrictive covenant provisions in turn, beginning with the provision most clearly vulnerable to challenge and concluding with the provision most likely to be enforced.
A. Non-Competition Clause (§ 9.1) — Almost Certainly Void
1. Governing Statute: California Business & Professions Code § 16600
The analysis of the non-competition clause begins and, in large measure, ends with California Business & Professions Code Section 16600. Section 16600 provides, in its entirety:
"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."
Cal. Bus. & Prof. Code § 16600.
This provision has been in continuous effect, in substantially the same form, since 1872, when it was originally enacted as Section 1673 of the California Civil Code. It reflects a deeply embedded and longstanding public policy of the State of California favoring open competition, employee mobility, and the free pursuit of lawful employment. As the California Supreme Court has observed, Section 16600 "represents a strong public policy of the State of California" and reflects the state's determination "that California's public policy in favor of open competition outweigh[s] any benefits of protecting an employer's interest in restricting competition by former employees." Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, 946 (internal citations omitted).
2. Key Precedent: *Edwards v. Kraft Quill CPAs LLP*
The controlling California Supreme Court decision on the enforceability of non-competition agreements in the employment context is Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937. In Edwards, the Court addressed the enforceability of a restrictive covenant contained in an employment agreement that prohibited the employee from working for a competing firm or soliciting clients of the firm following termination. The Court's analysis and holding are directly relevant to Section 9.1 of the Aldrich Employment Agreement.
In Edwards, the California Supreme Court held that Section 16600 invalidates non-competition agreements except for three narrow statutory exceptions specifically enumerated in the Business & Professions Code:
• Section 16601 — Sale of Business Goodwill: Permits a non-compete in connection with the sale of the goodwill of a business or the sale of all or substantially all of the operating assets of a business, or the sale of an ownership interest in a partnership or limited liability company;
• Section 16602 — Dissolution of Partnership: Permits a non-compete in connection with the dissolution of or dissociation from a partnership; and
• Section 16602.5 — Dissolution of LLC: Permits a non-compete in connection with the dissolution of or the termination of a membership interest in a limited liability company.
Edwards, 44 Cal.4th at 944–46.
None of these statutory exceptions applies to Aldrich's employment relationship with AMA. Aldrich was an employee of AMA. He did not sell a business to AMA, did not transfer business goodwill, and did not dissolve or dissociate from a partnership or limited liability company in connection with the Employment Agreement. The Employment Agreement is a straightforward employment contract, and the non-competition clause in Section 9.1 is a classic post-termination non-compete restraint in the employment context. There is no statutory basis for enforcing it under Sections 16601, 16602, or 16602.5.
Significantly, the Edwards Court expressly rejected the so-called "narrow restraint" or "trade secret" exception that some federal courts, most notably the Ninth Circuit in Campbell v. Trustees of Leland Stanford Jr. University (9th Cir. 1987) 817 F.2d 499, had previously recognized. Under that now-rejected approach, a non-competition agreement could be enforced if it was narrowly tailored and was reasonably necessary to protect the employer's trade secrets. The California Supreme Court squarely held that this approach was inconsistent with the plain text of Section 16600:
"[Section] 16600 is unambiguous, and if the Legislature intended the statute to apply only to unreasonable restraints, as the Ninth Circuit suggests, it could have included language to that effect. . . . We reject [the] narrow-restraint exception to section 16600 and hold that the statute prohibits employee noncompetition agreements unless the agreement falls within a statutory exception."
Edwards, 44 Cal.4th at 945–46.
The Court further emphasized the policy rationale underlying Section 16600, stating:
"Section 16600 protects Californians and ensures 'that every citizen shall retain the right to pursue any lawful employment and enterprise of their choice.' It protects 'the important legal right of persons to engage in businesses and occupations of their choosing.'"
Edwards, 44 Cal.4th at 945, 947 (quoting Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 859, and Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1520).
Edwards has been consistently followed by California courts and has been cited in numerous subsequent decisions as establishing the definitive rule that employee non-competition agreements are void under California law absent one of the three enumerated statutory exceptions. See, e.g., Ashbury Partners LLC (2009) 179 Cal.App.4th 564, 574–75 (applying Edwards to invalidate post-employment non-competition restriction); The Retirement Group v. Galante (2009) 176 Cal.App.4th 1226, 1237 (same).
3. Section 9.1 Is Clearly a Restraint on Competition Prohibited by § 16600
Section 9.1 of the Employment Agreement prohibits Aldrich from accepting employment with, rendering services to, or holding any ownership interest in any "Competing Enterprise" for a period of eighteen months following termination. The definition of "Competing Enterprise" is broad: it encompasses any entity that derives twenty-five percent (25%) or more of its annual gross revenue from the production, licensing, or distribution of unscripted or reality television content in North America.
This provision is precisely the type of restraint that Section 16600 was designed to prohibit. Aldrich's entire professional career has been in the unscripted television industry. He has spent approximately fifteen years developing expertise in the production, development, and licensing of unscripted and reality programming. The definition of "Competing Enterprise" in the Employment Agreement would encompass virtually every major production company and studio in the unscripted television space, including (by way of example and not limitation) Severin Group, Cobalt Ridge & Co., Harborline Industries, Halcyon Enterprises, Ridgeline Partners LLC, and numerous mid-size and boutique production companies. Enforcement of Section 9.1 would effectively bar Aldrich from working in his chosen field for a period of eighteen months—a result that Section 16600 categorically forbids.
We note that even if Section 9.1 were analyzed under a "reasonableness" standard (which, as discussed above, is not the correct standard under California law post-Edwards), the clause would face serious challenges. The eighteen-month duration is lengthy; the geographic scope (all of North America) is expansive; and the revenue-based definition of "Competing Enterprise" (≥ 25% of revenue from unscripted content) sweeps broadly enough to capture entities that are not direct competitors of AMA. However, these reasonableness concerns are academic under California law, because the threshold question is dispositive: Section 16600 renders the clause void, full stop.
4. Upcoming Legislation Reinforcing Public Policy
Although not yet in effect at the time of Aldrich's termination or the filing of the Aldrich Action, two pieces of pending California legislation will further reinforce the public policy underpinning Section 16600 and the Edwards holding:
Assembly Bill 1076 (AB 1076): Effective January 1, 2024, AB 1076 will add Section 16600.5 to the Business & Professions Code. Section 16600.5 will expressly provide that any contract that is void under Section 16600 is "unenforceable regardless of where and when the contract was signed." It will further require employers to notify current and former employees in writing that any non-compete clause or agreement to which the employee is subject is void. While AB 1076 does not change the substantive rule of Section 16600, it provides express statutory confirmation that the prohibition on non-competes applies without regard to the place of execution of the agreement or the location of the employer's headquarters—a point that is directly relevant to the choice-of-law issues addressed in the companion memorandum.
Senate Bill 699 (SB 699): Also effective January 1, 2024, SB 699 will add Section 16600.7 to the Business & Professions Code. Section 16600.7 will prohibit any employer from entering into or attempting to enforce a non-compete agreement with an employee who works in California, regardless of whether the agreement was signed in another state or is governed by the law of another state. SB 699 goes further than AB 1076 by expressly creating a cause of action for employees harmed by the enforcement of void non-compete agreements, including the right to recover actual damages, injunctive relief, and reasonable attorney's fees.
While neither AB 1076 nor SB 699 is yet in effect and therefore does not govern the Aldrich dispute directly, the enactment of these statutes underscores the depth and strength of California's public policy against non-competition restraints. A court considering the enforceability of Section 9.1 in the Aldrich Action would likely be aware of these legislative developments and may view them as further confirmation of the state's unwavering commitment to employee mobility and competition.
5. Conclusion on § 9.1
The non-competition clause in Section 9.1 of the Employment Agreement is void and unenforceable under California Business & Professions Code Section 16600, as interpreted by the California Supreme Court in Edwards v. Kraft Quill CPAs LLP. No statutory exception to Section 16600 applies to Aldrich's employment relationship with AMA, and the clause constitutes a classic post-termination restraint on competition that is categorically prohibited under California law.
We strongly recommend that AMA not attempt to enforce Section 9.1 against Aldrich in the Aldrich Action or in any other forum. Any cross-complaint filed by AMA in the Aldrich Action should not seek injunctive relief or damages based on Section 9.1. To the extent AMA seeks to protect its legitimate business interests against Aldrich's post-termination conduct, AMA should rely on the confidentiality provision in Section 9.4 and on trade secret protections available under the California Uniform Trade Secrets Act ("CUTSA"), California Civil Code Section 3426 et seq., as discussed in Section III.D below.
B. Non-Solicitation of Employees (§ 9.2) — Likely Enforceable
1. General Principle
California courts have generally drawn a distinction between non-competition clauses (which restrain the departing employee from competing in his or her chosen profession) and employee non-solicitation clauses (which merely restrict the departing employee from affirmatively targeting and poaching the former employer's workforce). While the line between the two is not always bright, the prevailing weight of California authority holds that employee non-solicitation clauses do not constitute restraints on trade or employment within the meaning of Section 16600, provided they are reasonably tailored and do not function as de facto non-competition provisions.
2. Favorable Authority
The leading case supporting the enforceability of employee non-solicitation clauses in California is Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268. In Loral, the California Court of Appeal upheld a covenant that restricted a departing employee from soliciting the employer's employees to leave the employer's service. The court reasoned that such a restriction "does not prohibit [the departing employee] from engaging in his profession, trade, or business; it merely restricts him from soliciting fellow employees to leave [the employer]." Loral, 174 Cal.App.3d at 276.
The Loral court's analysis rests on a common-sense distinction: an employee non-solicitation clause does not prevent the departing employee from pursuing his or her trade or profession. The departing employee remains free to seek employment wherever he or she chooses, to compete with the former employer, and to use his or her general skills and knowledge. The clause merely imposes a targeted restriction on one specific type of conduct—affirmatively recruiting the former employer's employees—that implicates the employer's legitimate interest in workforce stability, recruitment costs, and the preservation of institutional knowledge and team cohesion.
Employee non-solicitation clauses serve a well-recognized protective function. Employers invest significant resources in recruiting, training, and developing their employees. When a senior executive departs and systematically raids the employer's workforce, the resulting disruption can be severe—particularly in an industry like unscripted television, where production teams are assembled over long periods and the loss of key creative and operational personnel can jeopardize active and development-stage productions. The employee non-solicitation clause protects against this specific harm without imposing the broader competitive restraint that Section 16600 is designed to prevent.
3. Potentially Adverse Authority
We note, however, that the enforceability of employee non-solicitation clauses in California is not entirely settled. In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, the California Court of Appeal questioned whether broader employee non-solicitation clauses might run afoul of Section 16600 in certain contexts. In AMN Healthcare, the clause at issue broadly restricted the departing employee from soliciting the employer's temporary staffing employees—who numbered in the thousands and who were placed with third-party healthcare facilities. The court expressed concern that the clause, as applied in the staffing industry, functioned as a de facto non-compete because the "employees" subject to the non-solicitation restriction were, in economic substance, the employer's "product" and customer relationships.
The AMN Healthcare decision introduced a degree of uncertainty into the analysis. However, we believe that the decision is distinguishable from the present situation on several grounds:
First, the AMN Healthcare clause was far broader than Section 9.2 of the Aldrich Employment Agreement. The clause in AMN Healthcare covered all of the employer's staffing employees—a category numbering in the thousands—and was not limited to employees with whom the departing employee had a working relationship. By contrast, Section 9.2 is limited to AMA employees with whom Aldrich worked, collaborated, or had a reporting relationship during the twelve months preceding his termination.
Second, the staffing industry context in AMN Healthcare was unusual. The court's concern was that, in the staffing industry, "employees" are functionally equivalent to the employer's inventory or product—the company's business is placing those employees with clients. Soliciting those employees is, in economic reality, equivalent to soliciting the employer's clients and competing directly with the employer. The unscripted television production industry does not present the same dynamic. AMA's employees are its workforce, not its product.
Third, the AMN Healthcare court did not issue a categorical holding that all employee non-solicitation clauses are void under Section 16600. The decision was fact-specific and did not overrule Loral. Indeed, the AMN Healthcare court acknowledged the continued vitality of Loral and distinguished it on the facts.
4. Assessment of § 9.2
Section 9.2 of the Employment Agreement prohibits Aldrich from directly or indirectly soliciting, recruiting, inducing, or encouraging any AMA employee with whom Aldrich worked within the twelve months preceding termination to leave AMA's employment. The duration of the restriction is twenty-four months.
We assess Section 9.2 as likely enforceable for the following reasons:
Reasonable scope: The clause is limited to employees with whom Aldrich had an actual working relationship during a defined twelve-month look-back period. It does not sweep broadly across all of AMA's employees. Given AMA's headcount of approximately 430 full-time employees across multiple divisions, the clause likely covers a subset of employees in the unscripted programming division and related functions—perhaps 50 to 80 individuals—with whom Aldrich interacted in his capacity as SVP.
Does not restrain competition: The clause does not prevent Aldrich from working in the unscripted television industry, from competing with AMA, or from hiring individuals who are not AMA employees. It addresses only the targeted solicitation of a defined group of AMA employees. This is precisely the type of narrow restriction that the Loral court held was not a restraint on trade or employment under Section 16600.
Legitimate employer interest: Given Aldrich's senior position as SVP overseeing the entire unscripted programming division, he developed close working relationships with key creative talent, production staff, and operational personnel. AMA has a legitimate and substantial interest in protecting against the disruption that would result from targeted poaching of its workforce by a former senior executive who has intimate knowledge of the skills, compensation, and career aspirations of these employees.
Duration: The twenty-four-month duration is at the longer end of what courts have accepted, and there is some risk that a court might view it as excessive. However, it is not unprecedented, and courts have upheld non-solicitation restrictions of comparable duration in the context of senior executives. We note that if a court were to narrow the provision, the most likely adjustment would be a reduction in the duration from twenty-four months to twelve months, rather than complete invalidation of the clause.
5. Conclusion on § 9.2
Section 9.2 is likely enforceable under California law, though not entirely free from challenge in light of the uncertainty introduced by AMN Healthcare. We recommend that AMA assert Section 9.2 in any cross-complaint filed in the Aldrich Action and that AMA include the employee non-solicitation restriction as a key component of its settlement negotiation position. AMA should be prepared for the possibility that the court may narrow the clause—for example, by reducing the duration from twenty-four months to twelve months—but should not assume that the clause will be struck down entirely.
In the event that evidence emerges that Aldrich has in fact solicited or recruited AMA employees since his termination, AMA should move promptly to seek preliminary injunctive relief to enforce Section 9.2. We are monitoring this situation and will advise further as information becomes available.
C. Non-Solicitation of Business Relationships (§ 9.3) — Vulnerable
1. General Principle
Customer or client non-solicitation clauses occupy a more uncertain position under California law than employee non-solicitation clauses. California courts have been increasingly skeptical of such clauses, particularly where they function as de facto non-competition provisions by effectively precluding the former employee from working in his or her industry. The distinction turns on the practical impact of the clause: if the universe of potential clients is so limited, or if the departing employee's client relationships are so extensive, that the non-solicitation restriction effectively bars the employee from competing, then the clause may be treated as a non-compete and struck down under Section 16600.
2. Adverse Authority
The principal adverse authority is The Retirement Group v. Galante (2009) 176 Cal.App.4th 1226. In Galante, the Court of Appeal struck down a client non-solicitation clause as overly broad and unenforceable under Section 16600. The clause at issue prohibited the departing employee from soliciting any client of the employer for a specified period following termination. The court found that the clause effectively precluded the former employee from working in his field because "most potential clients were clients of [the employer]." Galante, 176 Cal.App.4th at 1239. In the court's view, the practical effect of the clause was indistinguishable from a non-compete: the former employee could not practice his profession without soliciting the employer's clients, because the employer's client base covered substantially all of the relevant market.
Other California courts have expressed similar concerns. In Ashbury Partners LLC (2009) 179 Cal.App.4th 564, the court invalidated restrictive covenants that, taken together, effectively prevented the employee from competing in his industry. Courts have consistently emphasized that employers may not achieve through indirect contractual mechanisms what Section 16600 forbids them from achieving directly—that is, preventing a former employee from competing.
3. Favorable Authority
On the other hand, some California courts have upheld narrowly drawn client non-solicitation provisions, particularly where the clause is limited to clients with whom the departing employee had a direct and substantial relationship and where the scope of the restriction does not foreclose the employee from competing generally. See, e.g., Marlowe Corporation v. Cascade Capital Markets (N.D. Cal. 2010) 2010 WL 546497 (noting that a narrowly tailored customer non-solicitation provision might survive scrutiny under Section 16600 where it does not effectively preclude the employee from competing). The key factor in the analysis is whether the restriction, as applied, functions as a restraint on the employee's ability to pursue his or her profession—or whether it merely targets specific, identifiable conduct (soliciting a defined group of clients) while leaving the employee free to compete for new business.
4. Assessment of § 9.3
Section 9.3 of the Employment Agreement prohibits Aldrich from directly or indirectly soliciting or diverting any business from any "network, platform, or advertiser client" of AMA with whom Aldrich had "material contact" during the twenty-four-month period immediately preceding termination. We assess this provision as moderately to significantly vulnerable to challenge under California law for the following reasons:
Breadth of scope: The clause covers "any network, platform, or advertiser client" of AMA with whom Aldrich had "material contact" over a twenty-four-month look-back period. Given Aldrich's senior position as SVP of Original Content, he was one of AMA's primary client-facing executives. He was directly involved in pitching content to, negotiating deals with, and managing relationships with the vast majority of AMA's key clients. Based on information provided by AMA, Aldrich had material contact during the relevant period with at least the following categories of clients: major broadcast networks (Dunmore Industries, Ridgeway Enterprises, ABC, Fox); cable networks (Bravo, Harborline & Co., Hollowell Partners LLC, Ashford Corporation, TLC); streaming platforms (Northgate Partners LLC, Dunmore Corporation, Dunmore Enterprises, Bramwell & Co., Fenmore Holdings, Ashford & Co.); and approximately fifteen to twenty major advertising partners and brand integration clients.
De facto non-compete effect: The unscripted television industry is characterized by a relatively concentrated buyer market. The networks, cable channels, and streaming platforms listed above represent the overwhelming majority of the buyers of unscripted and reality television content in North America. If Aldrich is prohibited from soliciting business from all of these entities for a period of twenty-four months, he is effectively prohibited from selling or pitching unscripted content to any significant buyer—which is, functionally, a prohibition on competing. This is precisely the scenario that concerned the court in Galante: a non-solicitation clause that, in practical effect, operates as a non-compete because the universe of potential clients is coextensive with the former employer's client base.
Duration: The twenty-four-month duration compounds the vulnerability. Even if the scope of the restriction were narrower, a twenty-four-month prohibition on client solicitation is aggressive and increases the likelihood that a court will view the clause as unreasonable or as a de facto restraint on competition.
Definition of "material contact": The definition of "material contact" in the Employment Agreement—any in-person meeting, substantive telephone call, or substantive written communication regarding the business relationship—is sufficiently broad that it could capture a very large number of client relationships. At Aldrich's level of seniority, virtually any business communication with a client would constitute "material contact" under this definition.
5. Conclusion on § 9.3
Section 9.3 is moderately to significantly vulnerable to challenge under California law. A California court may well conclude that the clause, as drafted and as applied to Aldrich's specific circumstances, functions as a de facto non-compete and is therefore void under Section 16600. The breadth of the client universe, the concentrated structure of the unscripted television content buyer market, and the twenty-four-month duration all cut against enforceability.
We recommend that AMA be prepared to narrow Section 9.3 significantly in settlement discussions—for example, by reducing the duration from twenty-four months to twelve months and narrowing the scope to clients with whom Aldrich served as the primary relationship holder (as distinguished from clients with whom he merely had "material contact"). AMA should not rely on Section 9.3 as a primary enforcement tool in the cross-complaint. If AMA does assert Section 9.3, it should be positioned as a secondary claim, and AMA should be prepared for the possibility that the court will decline to enforce it.
D. Confidentiality (§ 9.4) — Enforceable
1. General Principle
Confidentiality obligations are analytically and legally distinct from non-competition and non-solicitation provisions. A confidentiality obligation does not restrain the employee from engaging in a lawful profession, trade, or business; it merely prohibits the employee from using or disclosing the former employer's proprietary and confidential information. As such, confidentiality provisions do not implicate Section 16600 and are generally enforceable under California law.
This principle is well established. California courts have consistently held that an employer may contractually require its employees to maintain the confidentiality of proprietary information, trade secrets, and other sensitive business information, and that such obligations survive the termination of the employment relationship. See, e.g., Ashford Group (2002) 101 Cal.App.4th 1443, 1462 (distinguishing trade secret protections from non-compete restraints); Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1526 (recognizing employer's right to protect confidential information through contractual obligations). The critical distinction is that a confidentiality provision protects specific information, whereas a non-compete restricts the employee's ability to work. The former is a targeted protection of a legitimate business interest; the latter is a broad restriction on the employee's freedom of economic action.
2. Scope of § 9.4
Section 9.4 of the Employment Agreement provides that Aldrich shall not, during or after his employment with AMA, directly or indirectly use or disclose any "Confidential Information" of AMA without the prior written consent of AMA's President or General Counsel. "Confidential Information" is defined to include:
• Proprietary content, including content in development and pilot stages;
• Show formats, including format bibles, pitch decks, and sizzle reels;
• Revenue data, including per-episode budgets, licensing fees, and franchise valuations;
• Talent agreements, including compensation structures, deal terms, and option provisions;
• Audience analytics, including viewership data, demographic breakdowns, and platform-specific performance metrics;
• Strategic plans, including content development pipelines, market expansion strategies, and acquisition targets; and
• All other information that AMA has designated as confidential or that by its nature would reasonably be understood to be confidential.
This scope is well within the bounds of protectable interests under California law. Each of these categories constitutes the type of sensitive business information that employers routinely—and properly—seek to protect through contractual confidentiality obligations. The information listed derives its economic value, in whole or in part, from the fact that it is not generally known to AMA's competitors. AMA has taken reasonable steps to maintain the secrecy of this information, including (based on information provided by AMA's Legal & Compliance department):
• Application of confidential watermarks to development-stage and pilot-stage content materials;
• Maintenance of a secure internal content management system with individual login credentials and access controls;
• Adoption and enforcement of an Acceptable Use and Confidentiality Policy (the "Confidentiality Policy"), which Aldrich executed on April 12, 2021;
• Requirement of written authorization from AMA's President or Vice President of Business Affairs for any external transmission of development materials, format bibles, or other pre-release content; and
• Inclusion of confidentiality provisions in the Employment Agreement (Section 9.4) and in the Confidentiality Policy.
3. CUTSA — Independent Statutory Protection
In addition to the contractual confidentiality obligation in Section 9.4, AMA has an independent statutory basis for protecting its trade secrets under the California Uniform Trade Secrets Act ("CUTSA"), California Civil Code Section 3426 et seq. CUTSA defines a "trade secret" as:
"information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."
Cal. Civ. Code § 3426.1(d).
Based on the facts as currently understood, the following categories of information that Aldrich is alleged to have improperly transmitted to Halcyon Creek Productions LLC (via email to info@halcyoncreekprod.com) and to his personal email account (galdrich.private@Northgate Software.com) likely qualify as trade secrets under CUTSA:
• Show format bibles for "Apex Endurance," "The Remix," and "Untamed West" — These documents contain the detailed structural frameworks, episode arcs, character archetypes, challenge designs, scoring mechanics, and production methodologies for three of AMA's development-stage or active productions. They are not publicly available and are the product of substantial creative and financial investment by AMA.
• Pilot sizzle reels — Pre-release promotional materials containing proprietary footage, production design, and creative direction for pilots in development. These materials are shared only with potential network and platform buyers under non-disclosure agreements and are not publicly disseminated.
• Summit Challenge revenue model — AMA's proprietary financial model for the "Summit Challenge" franchise, which generates approximately $42 million in annual revenue across domestic and international markets. The model includes per-episode production costs, licensing fee structures, advertiser rate cards, and projected revenue growth. This information is highly sensitive and provides significant competitive advantage.
• Audience analytics — Proprietary viewership data, demographic analyses, and platform-specific performance metrics that AMA uses to inform content development decisions, pricing negotiations, and strategic planning.
• Talent deal terms — Compensation structures, option provisions, and deal terms for on-camera talent and executive producers associated with AMA productions. Disclosure of these terms could undermine AMA's negotiating position in future talent dealings.
Each of these categories satisfies both prongs of the CUTSA trade secret definition: the information derives independent economic value from not being generally known, and AMA has taken reasonable efforts to maintain its secrecy (as detailed in Section III.D.2 above).
CUTSA provides robust remedies for trade secret misappropriation, including injunctive relief (Cal. Civ. Code § 3426.2), actual damages measured by the trade secret owner's loss or the misappropriator's unjust enrichment (Cal. Civ. Code § 3426.3(a)), and, where the misappropriation is willful and malicious, exemplary damages in an amount not exceeding twice the amount of actual damages (Cal. Civ. Code § 3426.3(c)). CUTSA also permits an award of reasonable attorney's fees to the prevailing party in cases involving willful and malicious misappropriation or bad faith claims. Cal. Civ. Code § 3426.4.
4. Enforceability Not Affected by Section 16600
Section 9.4 is not a "restraint" on employment within the meaning of Section 16600. It does not prevent Aldrich from working in the unscripted television industry, from competing with AMA, or from using his general skills, knowledge, and experience. It prohibits only the use or disclosure of specific proprietary information belonging to AMA. This distinction is well recognized in California law. Even if Section 9.1 (the non-competition clause) is void under Section 16600—as we have concluded it almost certainly is—Section 9.4 survives independently. The invalidity of one provision in Section 9 does not infect or invalidate the other provisions; the Employment Agreement contains a severability clause (Section 14.8) that expressly provides for the independent enforceability of each provision.
5. Conclusion on § 9.4
Section 9.4 is enforceable under California law. It should serve as AMA's primary contractual basis for any cross-claims against Aldrich in the Aldrich Action. Combined with independent CUTSA trade secret misappropriation claims, Section 9.4 provides AMA with the strongest available foundation for protecting its legitimate business interests—the protection of its proprietary content, financial models, talent agreements, and strategic information—without running afoul of California's strong public policy against non-competition restraints.
We strongly recommend that AMA's cross-complaint in the Aldrich Action center on breach of Section 9.4 and on CUTSA misappropriation. These claims are well supported by the facts as currently known, are consistent with California law, and position AMA to seek both injunctive relief and damages without the credibility risks associated with attempting to enforce a void non-competition clause.
IV. Summary of Conclusions
The following table summarizes our enforceability assessment and recommendations for each of the four restrictive covenant provisions in Section 9 of the Employment Agreement:
V. Recommendations
Based on the foregoing analysis, we offer the following specific recommendations:
1. Do not attempt to enforce § 9.1 (non-compete). The non-competition clause in Section 9.1 is almost certainly void under California Business & Professions Code Section 16600 and the California Supreme Court's decision in Edwards v. Kraft Quill CPAs LLP. Attempting to enforce this provision would not only be unsuccessful but would also affirmatively undermine AMA's credibility with the court—the Honorable Catherine Villanueva, Department 52, in Case No. 22STCV41087—and with opposing counsel. In our experience, California courts react unfavorably to employers who aggressively pursue enforcement of provisions that are clearly void under controlling authority. Acknowledging the unenforceability of Section 9.1 in settlement discussions will signal to Aldrich's counsel that AMA is approaching the matter in good faith and will focus the negotiations on the issues where AMA has the strongest legal position. Moreover, pursuing Section 9.1 would divert resources from the more productive focus on trade secret protection and confidentiality enforcement.
2. Assert § 9.2 (employee non-solicitation) and § 9.4 (confidentiality) as the primary restrictive covenant bases for cross-claims. These two provisions have the strongest legal foundation under California law and are most directly relevant to the conduct at issue. The employee non-solicitation provision protects AMA's legitimate interest in workforce stability, and the confidentiality provision protects AMA's proprietary information and trade secrets. Both provisions are directly implicated by Aldrich's conduct, including his unauthorized transmission of proprietary materials—specifically, show format bibles, pilot sizzle reels, the Summit Challenge revenue model, audience analytics, and talent deal terms—to Halcyon Creek Productions LLC (via email to info@halcyoncreekprod.com) and to his personal email account (galdrich.private@Northgate Software.com) in the weeks preceding and following his termination.
3. Assert CUTSA trade secret claims as an independent cause of action. The CUTSA trade secret misappropriation claims do not depend on the enforceability of any contractual provision in the Employment Agreement. Even if every provision in Section 9 were invalidated, AMA would retain the right to pursue injunctive relief, actual damages, and exemplary damages under CUTSA based on Aldrich's misappropriation of trade secrets. As discussed in Section III.D.3 above, the information at issue—including the show format bibles for "Apex Endurance," "The Remix," and "Untamed West," the pilot sizzle reels, the Summit Challenge revenue model, and the audience analytics and talent deal terms—likely qualifies as trade secrets under CUTSA. In the event that the misappropriation is found to be willful and malicious, CUTSA authorizes exemplary damages in an amount up to twice the actual damages (Cal. Civ. Code § 3426.3(c)), as well as reasonable attorney's fees (Cal. Civ. Code § 3426.4). The CUTSA claims should be asserted as independent causes of action in AMA's cross-complaint, in addition to the contractual breach claims under Section 9.4.
4. Be prepared to narrow or abandon § 9.3 (client non-solicitation) in settlement. While Section 9.3 may have some value as a negotiating chip, it is the most vulnerable of the four restrictive covenant provisions and is unlikely to survive judicial scrutiny in its current form, given the breadth of client coverage and the concentrated structure of the unscripted television content buyer market. In settlement discussions, AMA should be prepared to offer meaningful concessions on Section 9.3—including reducing the duration from twenty-four months to twelve months, narrowing the scope to clients with whom Aldrich served as the primary relationship holder (rather than any client with whom he had "material contact"), or abandoning the provision entirely—in exchange for strong protections on confidentiality and trade secrets. AMA should not rely on Section 9.3 as a primary enforcement tool in the cross-complaint; if it is asserted, it should be positioned as a secondary claim that AMA is willing to negotiate.
5. Address the choice-of-law issue (§ 14.3) separately. The Employment Agreement contains a New York choice-of-law clause in Section 14.3, and Aldrich's counsel may argue that the restrictive covenants should be governed by New York law, which is more permissive of post-employment restraints than California law. The choice-of-law question is analyzed in detail in the companion memorandum dated December 22, 2022. In summary, a California court is unlikely to enforce the New York choice-of-law clause as applied to the restrictive covenant provisions because California's anti-non-compete policy constitutes a "fundamental policy" under the Restatement (Second) of Conflict of Laws Section 187(2), and California has a materially greater interest than New York in determining whether its resident employees are free to pursue their chosen profession. Aldrich resided and worked in California throughout his employment, performed substantially all of his services in California, and was based at AMA's California office. Under these circumstances, the application of New York law would be contrary to the fundamental policy of California and would not be applied by a California court. AMA should not rely on the choice-of-law clause to salvage the enforceability of Section 9.1, and should not base any portion of its litigation strategy on the assumption that New York law will be applied to the restrictive covenant provisions.
6. Monitor upcoming legislation and conduct a compliance audit. AB 1076 (adding Cal. Bus. & Prof. Code § 16600.5) and SB 699 (adding Cal. Bus. & Prof. Code § 16600.7), both effective January 1, 2024, will further strengthen California's prohibition on non-competition agreements and will impose new obligations on employers, including an affirmative notification requirement. In anticipation of these legislative changes, we recommend that AMA conduct a comprehensive audit of all existing employment agreements with California-based employees and senior executives to identify and remove non-competition clauses prior to the January 1, 2024 effective date. This audit should also assess whether any existing confidentiality, non-solicitation, or intellectual property assignment provisions require updating to ensure compliance with the evolving statutory framework. We will provide a separate compliance recommendation at the conclusion of this engagement, including a template notification letter for affected employees and a revised form of employment agreement reflecting the current state of California law.
We are available to discuss this memorandum and its recommendations at your earliest convenience. Please do not hesitate to contact us with any questions or to schedule a call.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Nadia Petrov Associate
777 South Flower Street, Suite 4200 Los Angeles, California 90017 Telephone: (213) 555-7251
Email: npetrov@calderwoodharkness.com
cc: Calderwood & Harkness LLP file Enclosures: None (companion memorandum re: choice-of-law analysis to follow under separate cover dated December 22, 2022)
Section | Restriction | Duration | Geographic / Subject-Matter Scope
§ 9.1 — Non-Competition | Prohibits Aldrich from accepting employment with, rendering services to, or holding any ownership interest in any "Competing Enterprise" | 18 months following the date of termination (regardless of whether termination is for cause, without cause, or by resignation) | A "Competing Enterprise" is defined as any entity that derives twenty-five percent (25%) or more of its annual gross revenue from the production, licensing, or distribution of unscripted or reality television content in North America
§ 9.2 — Non-Solicitation of Employees | Prohibits Aldrich from directly or indirectly soliciting, recruiting, inducing, or encouraging any employee of AMA to leave AMA's employment | 24 months following the date of termination | Limited to AMA employees with whom Aldrich worked, collaborated, or had a reporting relationship at any time during the 12-month period immediately preceding the date of termination
§ 9.3 — Non-Solicitation of Business Relationships | Prohibits Aldrich from directly or indirectly soliciting or diverting any business from any network, platform, advertiser, or other client of AMA | 24 months following the date of termination | Limited to clients with whom Aldrich had "material contact" during the 24-month period immediately preceding the date of termination; "material contact" is defined as any in-person meeting, substantive telephone call, or substantive written communication regarding the business relationship
§ 9.4 — Confidentiality | Prohibits Aldrich from using or disclosing any "Confidential Information" of AMA | Indefinite; survives termination of employment regardless of reason | Covers proprietary content (including development-stage and pilot-stage programming), show formats (including format bibles, pitch decks, and sizzle reels), revenue data, talent agreements, compensation structures, audience analytics, strategic plans, and all other information that AMA has designated as confidential or that by its nature would reasonably be understood to be confidential
Provision | Enforceability Assessment | Recommendation
§ 9.1 — Non-Competition (18 months) | Almost certainly void under Cal. Bus. & Prof. Code § 16600 and Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937. No statutory exception applies. | Do not attempt to enforce. Acknowledge unenforceability in settlement discussions to build credibility with opposing counsel and the court. Redirect enforcement strategy toward § 9.4 and CUTSA claims.
§ 9.2 — Employee Non-Solicitation (24 months) | Likely enforceable under Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, though subject to some uncertainty following AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923. Clause is reasonably narrow and does not function as a de facto non-compete. | Assert in cross-complaint and settlement negotiations. Be prepared for potential judicial narrowing of the duration (e.g., from 24 to 12 months). Monitor for evidence of actual solicitation by Aldrich.
§ 9.3 — Business Non-Solicitation (24 months) | Vulnerable. Significant risk of being struck down as a de facto non-compete under The Retirement Group v. Galante (2009) 176 Cal.App.4th 1226, given the breadth of client coverage and the concentrated structure of the unscripted television buyer market. | Be prepared to narrow or abandon in settlement discussions. Do not rely as a primary enforcement tool in the cross-complaint. Consider offering concessions on § 9.3 to strengthen negotiating position on § 9.4 and trade secret claims.
§ 9.4 — Confidentiality (indefinite) | Enforceable. Not a restraint on trade or employment under § 16600. Well within the scope of protectable interests. Supported by AMA's reasonable secrecy measures. | Primary contractual basis for cross-claims. Supplement with independent CUTSA trade secret misappropriation claims. Seek injunctive relief and damages.

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