1017-00004 · Entities. Aurelius Global Media Group · Pleadings/Aldrich

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CONFIDENTIAL — ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL

CALDERWOOD & HARKNESS LLP MEMORANDUM

TO: Renata Vasquez

FROM: Nadia Petrov

DATE: March 15, 2023

RE: Analysis and Annotations — Aldrich's Reply Brief in Support of Motion to Strike (Case No. 22STCV41087, Aldrich v. Aurelius Media Americas Inc.)

C&H Matter No.: 1017-00004

I. Summary and Introduction

This memorandum provides an internal analysis of the Reply Brief filed on March 15, 2023, by Gavin Aldrich ("Aldrich") in support of his pending Motion to Strike references to Section 9.1 — the eighteen-month post-termination non-competition clause — from the Cross-Complaint of Aurelius Media Americas Inc. ("AMA"). Aldrich is represented by Cameron Whitfield and Julia Nazarian of Whitfield & Associates, located at 9465 Wilshire Boulevard, Suite 320, Beverly Hills, California 90212. The matter is captioned Aldrich v. Aurelius Media Americas Inc., Case No. 22STCV41087, and is assigned to the Honorable Catherine Villanueva, Department 52, Los Angeles Superior Court.

AMA's Cross-Complaint was filed on January 20, 2023, and asserts four causes of action against Aldrich: (1) Breach of Employment Agreement (with specific reference to the Section 9 restrictive covenant framework, including Section 9.1); (2) Misappropriation of Trade Secrets under the California Uniform Trade Secrets Act ("CUTSA"), California Civil Code Section 3426 et seq.; (3) Breach of Fiduciary Duty; and (4) Conversion. Aldrich filed the instant Motion to Strike on February 10, 2023, seeking to strike all references to Section 9.1 from AMA's Cross-Complaint on the grounds that the non-competition clause is void and unenforceable under California Business and Professions Code Section 16600.

AMA filed its Opposition to the Motion to Strike on March 1, 2023, accompanied by a Memorandum of Points and Authorities and the Declaration of Devon Archer, AMA's Senior Vice President of Business Affairs. The Archer Declaration authenticated the following documents: (a) Aldrich's Employment Agreement with AMA dated September 5, 2017, as amended on August 1, 2020 (the "Employment Agreement"); (b) AMA's Acceptable Use and Confidentiality Policy, as revised in March 2021; and (c) Aldrich's signed acknowledgment of that policy, dated April 12, 2021.

In its Opposition, AMA made a significant concession: AMA expressly stated that it does not seek to enforce Section 9.1 as an independent basis for injunctive or monetary relief. AMA further offered, as an alternative proposal, to amend the Cross-Complaint to remove Section 9.1 from the caption of the First Cause of Action (Breach of Employment Agreement). However, AMA argued that references to Section 9.1 should be retained in the body of the Cross-Complaint as factual context relevant to AMA's claims under Section 9.4 (the indefinite confidentiality provision), its CUTSA trade secret misappropriation claim, and its breach of fiduciary duty claim. Specifically, AMA contended that the existence of the non-competition clause within the broader Section 9 restrictive covenant framework is probative of AMA's "reasonable efforts" to protect its trade secrets — a required element under CUTSA.

Aldrich's Reply Brief, which is the subject of this memorandum, advances three principal arguments in support of striking all references to Section 9.1: (A) that any reference to the non-compete, even as factual context, has a chilling effect on Aldrich's right to pursue employment; (B) that Section 9.1 is legally irrelevant to AMA's CUTSA claims and cannot serve as factual context; and (C) that pending California legislation — specifically Senate Bill 699 and Assembly Bill 1076 — reflects an intensifying public policy against non-competes that should inform the Court's analysis. This memorandum analyzes each of these arguments in turn and provides an assessment of the likely hearing outcome and our recommended course of action.

II. Argument A — Chilling Effect on Aldrich's Right to Pursue Employment

A. Summary of Aldrich's Argument

Aldrich's first and most forcefully presented argument is that any reference to Section 9.1 of the Employment Agreement in AMA's pleadings — even when characterized as mere "factual context" and even when AMA expressly disclaims enforcement — has a chilling effect on Aldrich's constitutional and statutory right to pursue employment in the unscripted and reality television industry. This argument occupies approximately six pages of the Reply Brief and is the focal point of Aldrich's counsel's advocacy.

Section 9.1 of the Employment Agreement, as executed on September 5, 2017, and as amended on August 1, 2020, provides that for a period of eighteen (18) months following the termination of Aldrich's employment with AMA, Aldrich shall not directly or indirectly render services to, or become employed by, any "Competing Enterprise." The Employment Agreement defines "Competing Enterprise" as any entity that derives twenty-five percent (25%) or more of its annual revenue from the production, licensing, or distribution of unscripted or reality television content in the North American market. Given the structure of the unscripted television industry, this definition encompasses virtually all of the major production companies, studios, and streaming platforms that would be likely employers for a senior executive of Aldrich's profile and experience.

Aldrich's counsel relies principally on Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, 947, in which the California Supreme Court reaffirmed the broad scope of Section 16600 and held that California's public policy protects "every citizen's right to pursue any lawful employment and enterprise of his or her choice." Aldrich's Reply characterizes AMA's "factual context" argument as a transparent attempt to leverage the non-compete as a litigation weapon and marketplace signal while simultaneously disclaiming any intent to enforce it. Whitfield and Nazarian argue that the mere presence of Section 9.1 in AMA's Cross-Complaint — regardless of disclaimers — sends a signal to potential employers, talent agencies, and industry participants that AMA views Aldrich as contractually constrained, thereby discouraging third parties from engaging or hiring him.

The Reply Brief further argues that AMA's so-called "alternative proposal" — offering to remove Section 9.1 from the caption of the First Cause of Action while retaining substantive references in the body of the pleading — is insufficient to eliminate the chilling effect. Aldrich's counsel characterizes this as a "cosmetic revision" that does not address the fundamental harm. The Reply contends that as long as Section 9.1 appears anywhere in AMA's Cross-Complaint, the damage to Aldrich's employment prospects persists, particularly in an industry where cross-complaint filings and associated pleadings are closely monitored by competitors, talent representatives, and trade press.

B. Our Assessment

This is Aldrich's strongest argument, and we should not underestimate the receptivity of a Los Angeles Superior Court judge — particularly one with experience in employment litigation — to the chilling-effect theory. California courts have been increasingly protective of employee mobility, and the policy articulated in Edwards carries significant weight.

The California Supreme Court in Edwards confirmed that Business and Professions Code Section 16600 broadly invalidates non-competition agreements, subject only to narrow statutory exceptions codified in Sections 16601 (sale of business goodwill), 16602 (dissolution of partnership), and 16602.5 (dissolution of limited liability company). Edwards, 44 Cal.4th at 945. None of these statutory exceptions applies to Aldrich's employment relationship with AMA. The Edwards court expressly rejected the so-called "narrow restraint" or "trade secret" exception that some earlier Court of Appeal decisions had recognized, making clear that the statutory framework does not permit judicially-created carve-outs from Section 16600's broad prohibition. Id. at 946-948.

There is no question that Section 9.1, standing alone, is void and unenforceable under California law. The relevant question before the Court is whether AMA may reference a void contractual provision in its pleadings for purposes other than enforcement — specifically, as factual context relevant to the CUTSA "reasonable efforts" element and the broader restrictive covenant framework surrounding the confidentiality obligations Aldrich allegedly breached.

AMA's position is strengthened considerably by the fact that AMA has already expressly offered to amend the Cross-Complaint to clarify that it is not seeking injunctive or monetary relief based on Section 9.1. This voluntary concession should substantially mitigate the chilling-effect concern. If AMA's pleadings affirmatively state that AMA does not seek to enforce Section 9.1 and does not seek any relief premised on the non-compete, the risk that the pleadings will be interpreted by third parties as a signal that AMA is actively restraining Aldrich's employment is materially reduced.

The Court should take this concession into account in evaluating Aldrich's argument. There is a meaningful difference between a cross-complaint that asserts a non-compete claim — seeking to enjoin a former employee from working for competitors — and a cross-complaint that references the existence of a non-compete clause within a broader restrictive covenant framework for the limited purpose of demonstrating what protective measures the employer implemented. AMA is not "asserting" a non-compete claim in any operative sense; it is describing the contractual environment in which Aldrich was employed and from which AMA's protectable interests arise.

That said, Aldrich's argument has force. A court sympathetic to employee mobility concerns may conclude that any pleading reference to an unenforceable non-compete carries an inherent chilling effect, regardless of disclaimers. In such an environment, even a well-crafted disclaimer may be viewed as insufficient. The risk is amplified by the practical reality that court filings are public records, and industry participants may draw inferences from the mere presence of non-compete language in AMA's pleadings without parsing the legal disclaimers.

Risk Assessment: Moderate. The Court may find some continuing chilling effect despite AMA's concession, but AMA's voluntary offer to amend should satisfy the Court if AMA's counsel presents it effectively at the hearing. The key is to frame AMA's position as one of transparency and good faith — acknowledging that Section 9.1 is not the basis for any claim, while preserving AMA's right to describe the factual landscape in which Aldrich's alleged misconduct occurred.

III. Argument B — Section 9.1 Cannot Be Used as "Factual Context" for CUTSA Claims

A. Summary of Aldrich's Argument

Aldrich's second argument focuses on the relationship between Section 9.1 and AMA's Second Cause of Action for Misappropriation of Trade Secrets under the California Uniform Trade Secrets Act, California Civil Code Section 3426 et seq. Aldrich contends that Section 9.1 is legally irrelevant to AMA's CUTSA claims and therefore cannot be retained in the Cross-Complaint even in the guise of "factual context."

The core of Aldrich's argument is that CUTSA provides its own self-contained statutory framework for the protection of trade secrets, independent of contractual non-competition provisions. Under CUTSA, a plaintiff must demonstrate that (i) the information at issue constitutes a "trade secret" within the meaning of Civil Code Section 3426.1(d) — i.e., information that derives independent economic value from not being generally known and is the subject of efforts reasonable under the circumstances to maintain its secrecy — and (ii) the defendant engaged in "misappropriation" as defined in Civil Code Section 3426.1(b) — i.e., acquisition by improper means or disclosure or use without consent. Aldrich argues that the existence of a void non-competition clause proves nothing about either of these elements. Whether AMA's information constitutes a trade secret, and whether Aldrich misappropriated it, are questions that are answered entirely within the CUTSA framework and do not require or permit reference to an unenforceable contractual provision.

Aldrich's Reply further contends that allowing AMA to use Section 9.1 as "factual context" for CUTSA claims conflates two distinct legal concepts: the contractual enforceability of a restrictive covenant and the statutory protection of trade secrets. Aldrich argues that AMA is attempting to import the stigma of a non-compete into a trade secret case, thereby creating an impression that Aldrich was subject to binding restrictions on his employment when, as a matter of California law, he was not.

B. Our Assessment

This is a substantially weaker argument, and we believe the Court is unlikely to accept it. The reason is straightforward: under CUTSA, one of the essential elements that AMA must prove is that it took "efforts that are reasonable under the circumstances to maintain [the] secrecy" of its trade secrets. Cal. Civ. Code § 3426.1(d)(2). The existence of contractual provisions designed to protect confidential information — including restrictive covenant provisions — is directly relevant to this element.

The restrictive covenant provisions in Section 9 of the Employment Agreement constitute part of AMA's overall program of trade secret protection. Section 9 is a comprehensive framework that includes four distinct restrictive covenants:

• Section 9.1: Non-competition (18 months post-termination; prohibits work for any "Competing Enterprise" deriving ≥ 25% of revenue from unscripted/reality television in North America);

• Section 9.2: Non-solicitation of employees (24 months post-termination; prohibits soliciting or inducing any AMA employee to leave AMA's employment);

• Section 9.3: Non-solicitation of business relationships (24 months post-termination; prohibits soliciting or interfering with AMA's relationships with clients, talent, networks, and business partners);

• Section 9.4: Confidentiality (indefinite duration; prohibits disclosure or use of AMA's proprietary and confidential information at any time during or after employment).

These provisions, taken together, demonstrate AMA's intent and efforts to protect its proprietary information. While Section 9.1 may be unenforceable as an independent restriction on Aldrich's employment, its inclusion in the Employment Agreement is nonetheless probative of the comprehensive approach AMA took to safeguarding its trade secrets. The existence of a multi-layered restrictive covenant framework — encompassing non-competition, non-solicitation, and confidentiality obligations — is evidence that AMA did not merely rely on informal understandings or ad hoc measures but instead implemented a structured, contractual program to protect its sensitive business information.

California courts have recognized the relevance of non-compete agreements in CUTSA cases for precisely this purpose. In FLIR Systems, Inc. v. Parrish (2009) 174 Cal.App.4th 1270, 1278, the Court of Appeal held that restrictive covenant provisions are relevant to the "reasonable efforts" element of a trade secret claim. The court in FLIR Systems acknowledged that the enforceability of a particular covenant is a separate question from its relevance as evidence of the employer's protective measures. An employer that includes a non-competition clause in its employment agreements — even one that may ultimately be unenforceable under the governing jurisdiction's law — has taken a concrete step to communicate to its employees that it considers certain information and competitive activities to be restricted. That communication, and the contractual framework in which it is embedded, is relevant evidence of reasonable efforts to maintain secrecy.

In this case, AMA's proprietary information at issue includes, among other things:

• Proprietary show format bibles for Apex Endurance, The Remix, and Untamed West;

• The Summit Challenge revenue model and associated financial projections;

• Audience analytics data and methodologies;

• Talent deal terms, compensation structures, and negotiation strategies.

The evidence developed in discovery to date indicates that Aldrich transmitted materials containing this proprietary information to Halcyon Creek Productions LLC (via the email address info@halcyoncreekprod.com) and to his personal email account (galdrich.private@Northgate Software.com). The question of whether AMA took reasonable efforts to protect this information is central to AMA's CUTSA claim, and the existence of the Section 9 restrictive covenant framework — including Section 9.1 — is directly probative of that issue.

The critical distinction that AMA must emphasize is the difference between enforcement and evidentiary use. AMA is not asking the Court to enforce Section 9.1 against Aldrich. AMA is not seeking an injunction preventing Aldrich from working for competitors. AMA is citing Section 9.1 as one component of its comprehensive program of trade secret protection — a program that also includes the confidentiality provision in Section 9.4, the non-solicitation provisions in Sections 9.2 and 9.3, the Acceptable Use and Confidentiality Policy, and the acknowledgment Aldrich signed on April 12, 2021. This is a permissible evidentiary use that is well within the scope of what CUTSA contemplates in requiring proof of "reasonable efforts."

Aldrich's argument essentially asks the Court to hold that because a particular contractual provision is unenforceable, it ceases to exist as a fact — that it cannot be referenced in any pleading for any purpose. This is an overbroad proposition that finds no support in the case law. Unenforceable contract provisions are routinely referenced in litigation for range purposes, including to establish the parties' intent, to describe the contractual framework governing the relationship, and to demonstrate the scope of protective measures an employer implemented.

Risk Assessment: Low. The Court is unlikely to accept Aldrich's argument that Section 9.1 is wholly irrelevant to AMA's CUTSA claims. The "reasonable efforts" element of CUTSA provides a clear and well-established basis for retaining references to the restrictive covenant framework, and the FLIR Systems authority directly supports AMA's position. We expect the Court to draw the distinction between enforcement and evidentiary use, particularly given AMA's express disclaimer of any intent to enforce Section 9.1.

IV. Argument C — SB 699 and AB 1076 as Further Grounds for Striking Section 9.1 References

A. Summary of Aldrich's Argument

Aldrich's third argument invokes pending California legislation — specifically Senate Bill 699 ("SB 699") and Assembly Bill 1076 ("AB 1076") — as further grounds for striking all references to Section 9.1 from AMA's Cross-Complaint.

SB 699, which upon enactment will be codified as California Business and Professions Code Section 16600.5, is scheduled to become effective on January 1, 2024. The bill provides, among other things, that it shall be unlawful for an employer to "enter into or attempt to enforce a noncompete agreement regardless of whether the contract was signed and the employment was maintained outside of California." Aldrich's counsel argues that SB 699 reflects the California Legislature's clear and intensifying commitment to eradicating non-competition agreements from employment relationships, and that this legislative intent should inform the Court's analysis of the present motion even though the statute is not yet in effect.

Aldrich's Reply also references AB 1076, a companion bill that reinforces the existing prohibition in Section 16600. Together with SB 699, AB 1076 will impose an affirmative obligation on employers to notify all current and former employees — specifically, those who were employed after January 1, 2022 — that any non-competition clause in their employment agreement is void and unenforceable under California law. Aldrich argues that this notification requirement underscores the Legislature's judgment that the mere existence of non-compete provisions in employment agreements causes harm, even when the provisions are not actively enforced.

Aldrich's counsel contends that the combination of existing law (Section 16600 and Edwards) and the imminent legislative enactments (SB 699 and AB 1076) compels the Court to take the strongest possible position against non-compete references in pleadings and to strike all references to Section 9.1 from AMA's Cross-Complaint without exception.

B. Our Assessment

This argument is premature and should be given little weight by the Court. The fundamental problem with Aldrich's reliance on SB 699 and AB 1076 is that neither statute is yet in effect. SB 699 has an effective date of January 1, 2024, which is approximately nine months after the filing of the Reply Brief and the anticipated hearing date. AB 1076 is on the same timeline. Courts decide motions based on the law in effect at the time of the ruling, not on the basis of prospective legislation that has been passed but has not yet taken effect. A court cannot apply a statute that does not yet exist as operative law.

While it is certainly true that the Court may take judicial notice of the legislative trend as additional context for California's strong and well-established anti-non-compete public policy, this is different from applying a prospective statute as a basis for granting a motion. The existing legal framework — Section 16600 as interpreted by Edwards — is already robust, and AMA has already conceded that Section 9.1 is unenforceable. The question before the Court is not whether Section 9.1 is enforceable (all parties agree it is not), but whether AMA may reference an unenforceable provision as factual context in support of its other claims. SB 699 and AB 1076 do not address this specific question.

Moreover, even under the forthcoming legislation, there is an important distinction between "attempting to enforce" a non-competition agreement — which SB 699 would prohibit — and citing the existence of a non-competition provision as evidence of an employer's reasonable efforts to protect trade secrets. AMA is not "attempting to enforce" Section 9.1 by referencing it in its Cross-Complaint as factual context for its CUTSA claim. AMA has expressly disclaimed enforcement. The use of Section 9.1 as evidence of a protective framework is analytically distinct from the conduct that SB 699 targets, and we believe this distinction would hold even after SB 699 becomes effective.

That said, we should be mindful of the fact that the legislative trend may influence the Court's overall disposition. A judge who is aware that the Legislature is on the verge of enacting even stronger protections against non-compete agreements may be more inclined to view AMA's references to Section 9.1 with skepticism, even if the prospective statutes do not technically apply to the pending motion. This is a matter of judicial temperament and inclination rather than legal compulsion, and it is difficult to predict with certainty. Our experience before Judge Villanueva suggests she is methodical in applying the law as it exists and is unlikely to base a ruling on legislation that has not yet taken effect, but the broader policy environment is worth noting.

Risk Assessment: Low. The Court is very unlikely to grant the Motion to Strike based on legislation that is not yet effective. However, the legislative trend reinforces the general policy environment that favors employee mobility and disfavors non-compete provisions, and this may subtly influence the Court's overall approach to the motion. We should be prepared to address the SB 699 argument at the hearing by emphasizing the distinction between enforcement and evidentiary use, and by noting the temporal inapplicability of the prospective statute.

V. Additional Observations on Aldrich's Reply

In addition to the three principal arguments analyzed above, we note several additional observations regarding Aldrich's Reply Brief that are relevant to our preparation for the hearing.

A. Aldrich's Own Declaratory Relief Claim

A significant and, in our view, underexploited point is that Aldrich himself has placed the enforceability of the Section 9 restrictive covenants squarely at issue in this litigation. The Fourth Cause of Action in Aldrich's Complaint — filed on November 14, 2022 — seeks declaratory relief under Code of Civil Procedure Section 1060, specifically requesting a judicial declaration that Section 9.1 (the non-competition clause), Section 9.2 (the employee non-solicitation clause), and Section 9.3 (the business non-solicitation clause) are void and unenforceable under California Business and Professions Code Section 16600. Aldrich's declaratory relief claim asks the Court to adjudicate the legal status of these very provisions.

It is difficult to reconcile Aldrich's request that the Court strike all references to Section 9.1 from AMA's Cross-Complaint with the fact that Aldrich's own Complaint keeps Section 9.1 squarely before the Court. AMA is entitled to reference and respond to the very provisions that Aldrich has affirmatively challenged. If the Court were to grant Aldrich's Motion to Strike in full — eliminating all references to Section 9.1 from AMA's Cross-Complaint — while Aldrich's declaratory relief claim remains pending, the result would be an asymmetric pleading framework in which Aldrich is free to litigate the enforceability of Section 9.1 but AMA is prohibited from even mentioning the provision in its responsive pleading. This would be manifestly prejudicial to AMA.

Aldrich's Reply Brief does not adequately address this asymmetry. The Reply contains a brief footnote suggesting that Aldrich's declaratory relief claim is "distinct" from AMA's use of Section 9.1 in the Cross-Complaint, but it does not explain how the Court could logically prohibit AMA from referencing a provision that is the express subject of Aldrich's own cause of action. This is a significant weakness in Aldrich's Reply, and we should be prepared to emphasize it at the hearing.

B. Choice-of-Law Dimension

We note that Aldrich's Reply Brief does not engage with the choice-of-law issue arising from Section 14.3 of the Employment Agreement. Section 14.3 contains a governing law provision selecting New York law as the law applicable to the interpretation and enforcement of the Employment Agreement. As discussed in our separate memorandum dated December 22, 2022, while New York law is more permissive of post-employment restrictive covenants than California law, a California court adjudicating a dispute involving a California-based employee and California-based employer will almost certainly apply California law under the Restatement (Second) of Conflict of Laws Section 187(2) framework. Under that framework, the chosen law will not be applied if (a) the chosen state has no substantial relationship to the parties or the transaction, or (b) application of the chosen law would be contrary to a fundamental policy of a state whose law would otherwise apply and that state has a materially greater interest in the issue. California's prohibition on non-competition agreements under Section 16600 has been recognized as reflecting a "fundamental policy" for purposes of Section 187(2), and California's interest in protecting the mobility of a California-based employee is materially greater than New York's interest in applying its own more permissive framework.

The fact that Aldrich's Reply does not press the choice-of-law argument suggests that Aldrich's counsel is confident that the Court will apply California law to the enforceability of Section 9.1. This is consistent with our own assessment and confirms that the choice-of-law issue is unlikely to be a contested point at the hearing. For AMA's purposes, this is a neutral development — AMA has already conceded that Section 9.1 is unenforceable under California law, and the application of California law does not affect AMA's argument that Section 9.1 may be referenced as factual context for the CUTSA claim.

C. Procedural Limitations of the Motion to Strike

A final observation concerns the procedural posture of Aldrich's motion. Under California Code of Civil Procedure Section 436, a motion to strike is limited in scope to striking "irrelevant, false, or improper matter" from a pleading, or matter that is "not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court." The motion to strike is a procedural mechanism with a narrow function; it is not a vehicle for testing the merits of individual allegations or for obtaining substantive rulings on the enforceability of contract provisions.

The Court of Appeal addressed this distinction in PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1683, holding that a motion to strike is not a substitute for a demurrer and should not be used to challenge the legal sufficiency of individual factual allegations. Factual allegations that provide context for properly pled causes of action are not "irrelevant" within the meaning of Section 436 merely because they reference a contractual provision that may be unenforceable. The question of whether Section 9.1 is enforceable is a merits question that goes to the ultimate disposition of AMA's claims and Aldrich's declaratory relief claim — it is not the type of question that a motion to strike is designed to resolve.

Aldrich's Reply effectively asks the Court to use the motion to strike as a vehicle for a premature merits determination on Section 9.1's enforceability. While the unenforceability of Section 9.1 is not seriously in dispute, the procedural mechanism Aldrich has chosen is not well-suited to the relief he seeks. The proper remedy, if Aldrich believes that AMA's references to Section 9.1 are legally insufficient to support any cause of action, would be a demurrer — not a motion to strike. This procedural objection provides an additional basis for the Court to deny the motion in part, and we should be prepared to raise it at the hearing if the opportunity arises.

VI. Predicted Outcome

Based on our analysis of Aldrich's three principal arguments, AMA's Opposition and alternative proposal, and the relevant legal authorities, we predict the following outcome at the hearing:

Most likely result: The Court will grant the Motion to Strike in part and deny it in part.

Grant in part: The Court will likely require AMA to remove Section 9.1 from the caption of the First Cause of Action (Breach of Employment Agreement) and to add an express clarification that AMA does not seek injunctive or monetary relief based on the enforcement of Section 9.1. This is consistent with the alternative proposal AMA itself offered in its Opposition, and the Court is likely to view AMA's voluntary concession as a reasonable resolution of the chilling-effect concern. By removing Section 9.1 from the caption and adding an enforcement disclaimer, AMA eliminates the primary basis for Aldrich's argument that the Cross-Complaint signals an active non-compete claim to employers and industry participants.

Deny in part: The Court will likely allow AMA to retain references to Section 9.1 in the body of the Cross-Complaint as factual context relevant to the broader Section 9 restrictive covenant framework and AMA's demonstration of "reasonable efforts" to protect its trade secrets under CUTSA. The Court will likely find that the existence of Section 9.1 within the Employment Agreement's comprehensive restrictive covenant framework is relevant — not for purposes of enforcement — but as evidence of AMA's comprehensive approach to protecting its confidential information, including its proprietary show format bibles (for Apex Endurance, The Remix, and Untamed West), the Summit Challenge revenue model, audience analytics data, and talent deal terms. The FLIR Systems authority directly supports this conclusion, and Aldrich's Reply does not offer a persuasive distinction of that case.

This predicted outcome is consistent with AMA's alternative proposal as set forth in its Opposition and does not materially prejudice AMA's litigation position. AMA's core claims — breach of Section 9.4 (the indefinite confidentiality provision), CUTSA misappropriation of trade secrets, breach of fiduciary duty, and conversion — do not depend on enforcing the non-competition clause. The substantive strength of AMA's case rests on the evidence of Aldrich's unauthorized transmission of proprietary materials and his breach of the confidentiality obligations that remain enforceable under California law.

We acknowledge a secondary possibility that the Court could grant the motion in full, striking all references to Section 9.1 from the Cross-Complaint. This outcome is less likely but not impossible, particularly if the Court is strongly influenced by the chilling-effect argument and concludes that no amount of disclaimer language can cure the harm caused by referencing a void non-compete in a public pleading. If this occurs, AMA's CUTSA claim would not be materially impaired — AMA can still establish "reasonable efforts" through reference to Section 9.4 (confidentiality), Sections 9.2 and 9.3 (non-solicitation), the Acceptable Use and Confidentiality Policy, and other protective measures — but the evidentiary presentation would be somewhat less comprehensive.

VII. Recommendations

Based on the foregoing analysis, we recommend the following actions in preparation for and following the hearing on Aldrich's Motion to Strike:

1. Prepare Amended Cross-Complaint. We should have a draft Amended Cross-Complaint prepared and ready for immediate filing in the event the Court grants the Motion to Strike in whole or in part. The amended pleading should incorporate the following modifications:

(a) Remove Section 9.1 (non-competition) from the caption of the First Cause of Action (Breach of Employment Agreement), so that the claim is expressly limited to breach of Section 9.4 (confidentiality) and, to the extent separately actionable, Sections 9.2 and 9.3 (non-solicitation);

(b) Add a clear and unambiguous statement — in the introductory paragraphs or in a prefatory clause to the First Cause of Action — that AMA does not seek injunctive or monetary relief based on the enforcement of Section 9.1 and does not contend that Section 9.1 is enforceable under California law;

(c) Retain references to the Section 9 restrictive covenant framework, including Section 9.1, in the factual allegations of the Cross-Complaint as context for AMA's demonstration of "reasonable efforts" to protect trade secrets under CUTSA and as background for the breach of Section 9.4;

(d) Continue to assert the remaining three causes of action — CUTSA misappropriation of trade secrets, breach of fiduciary duty, and conversion — without modification.

A draft of this Amended Cross-Complaint should be circulated internally for review by no later than March 22, 2023, so that it is available for filing promptly after the hearing.

2. Preparation for the Hearing. If the Court questions AMA's position at the hearing, AMA's counsel should be prepared to emphasize the following points:

(a) AMA's voluntary offer to amend the Cross-Complaint — removing Section 9.1 from the First Cause of Action caption and adding an express enforcement disclaimer — demonstrates good faith and a willingness to address Aldrich's legitimate concerns about the chilling effect of non-compete references;

(b) Aldrich's own Fourth Cause of Action for declaratory relief keeps Section 9.1 squarely at issue in this litigation. AMA must be permitted to reference and respond to the very provision that Aldrich has affirmatively challenged. Striking AMA's references to Section 9.1 while Aldrich's declaratory relief claim remains pending would create an asymmetric and prejudicial pleading framework;

(c) The FLIR Systems, Inc. v. Parrish authority directly supports AMA's position that non-compete provisions are relevant to the CUTSA "reasonable efforts" element, even when those provisions are not independently enforceable. The existence of a comprehensive restrictive covenant framework — of which Section 9.1 is one component — is probative of AMA's efforts to protect the secrecy of its proprietary information;

(d) Aldrich's reliance on SB 699 and AB 1076 is premature, as neither statute is yet in effect. The Court should decide the motion based on the law as it exists, not on prospective legislation.

3. Strategic Note on Going-Forward Restrictive Covenant Posture. Consistent with our prior analysis set forth in the memorandum dated December 20, 2022, AMA should not attempt to enforce Section 9.1 in any context — whether in this litigation, in settlement discussions, or in communications with third parties. AMA's litigation posture is strongest when it focuses on protectable interests that California law recognizes and enforces: the indefinite confidentiality obligation under Section 9.4, the CUTSA trade secret framework, and the breach of fiduciary duty claim arising from Aldrich's unauthorized transmission of proprietary materials.

In settlement discussions, AMA should be prepared to concede Section 9.1's unenforceability and focus negotiating leverage on the following:

(a) Meaningful protections for proprietary and confidential information under Section 9.4, which imposes an indefinite obligation and is enforceable under California law;

(b) Non-solicitation protections under Sections 9.2 (employee non-solicitation, 24-month duration) and 9.3 (business relationship non-solicitation, 24-month duration), the enforceability of which under California law is a closer question but which may be defensible under the right circumstances, particularly if narrowly drawn;

(c) Recovery of or injunctive relief concerning the specific proprietary materials that Aldrich transmitted to Halcyon Creek Productions LLC, a California limited liability company formed on February 14, 2022, by Nina Castellanos. Castellanos is Aldrich's former business associate and a former AMA Director of Development who departed AMA's employment in January 2022. The formation of Halcyon Creek Productions approximately one month after Castellanos's departure, and the subsequent transmission of AMA proprietary materials to Halcyon Creek's corporate email address, form the factual core of AMA's trade secret and conversion claims.

By conceding the unenforceability of Section 9.1 and focusing on protectable interests, AMA builds credibility with the Court and focuses its litigation resources on claims that have both legal merit and practical value. The unauthorized transmission of proprietary show format bibles, revenue models, audience analytics, and talent deal terms to a competing production venture is the heart of this case — and it does not require enforcement of a non-compete to succeed.

Please contact me to discuss this analysis at your convenience. I will circulate a draft of the Amended Cross-Complaint by end of week for your review.

Nadia Petrov Associate Calderwood & Harkness LLP

By: ________

Date: ________

CONFIDENTIAL — ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the addressee and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.

CONFIDENTIAL — ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL
CALDERWOOD & HARKNESS LLP MEMORANDUM
TO: Renata Vasquez
FROM: Nadia Petrov
DATE: March 15, 2023
RE: Analysis and Annotations — Aldrich's Reply Brief in Support of Motion to Strike (Case No. 22STCV41087, Aldrich v. Aurelius Media Americas Inc.)
C&H Matter No.: 1017-00004
I. Summary and Introduction
This memorandum provides an internal analysis of the Reply Brief filed on March 15, 2023, by Gavin Aldrich ("Aldrich") in support of his pending Motion to Strike references to Section 9.1 — the eighteen-month post-termination non-competition clause — from the Cross-Complaint of Aurelius Media Americas Inc. ("AMA"). Aldrich is represented by Cameron Whitfield and Julia Nazarian of Whitfield & Associates, located at 9465 Wilshire Boulevard, Suite 320, Beverly Hills, California 90212. The matter is captioned Aldrich v. Aurelius Media Americas Inc., Case No. 22STCV41087, and is assigned to the Honorable Catherine Villanueva, Department 52, Los Angeles Superior Court.
AMA's Cross-Complaint was filed on January 20, 2023, and asserts four causes of action against Aldrich: (1) Breach of Employment Agreement (with specific reference to the Section 9 restrictive covenant framework, including Section 9.1); (2) Misappropriation of Trade Secrets under the California Uniform Trade Secrets Act ("CUTSA"), California Civil Code Section 3426 et seq.; (3) Breach of Fiduciary Duty; and (4) Conversion. Aldrich filed the instant Motion to Strike on February 10, 2023, seeking to strike all references to Section 9.1 from AMA's Cross-Complaint on the grounds that the non-competition clause is void and unenforceable under California Business and Professions Code Section 16600.
AMA filed its Opposition to the Motion to Strike on March 1, 2023, accompanied by a Memorandum of Points and Authorities and the Declaration of Devon Archer, AMA's Senior Vice President of Business Affairs. The Archer Declaration authenticated the following documents: (a) Aldrich's Employment Agreement with AMA dated September 5, 2017, as amended on August 1, 2020 (the "Employment Agreement"); (b) AMA's Acceptable Use and Confidentiality Policy, as revised in March 2021; and (c) Aldrich's signed acknowledgment of that policy, dated April 12, 2021.
In its Opposition, AMA made a significant concession: AMA expressly stated that it does not seek to enforce Section 9.1 as an independent basis for injunctive or monetary relief. AMA further offered, as an alternative proposal, to amend the Cross-Complaint to remove Section 9.1 from the caption of the First Cause of Action (Breach of Employment Agreement). However, AMA argued that references to Section 9.1 should be retained in the body of the Cross-Complaint as factual context relevant to AMA's claims under Section 9.4 (the indefinite confidentiality provision), its CUTSA trade secret misappropriation claim, and its breach of fiduciary duty claim. Specifically, AMA contended that the existence of the non-competition clause within the broader Section 9 restrictive covenant framework is probative of AMA's "reasonable efforts" to protect its trade secrets — a required element under CUTSA.
Aldrich's Reply Brief, which is the subject of this memorandum, advances three principal arguments in support of striking all references to Section 9.1: (A) that any reference to the non-compete, even as factual context, has a chilling effect on Aldrich's right to pursue employment; (B) that Section 9.1 is legally irrelevant to AMA's CUTSA claims and cannot serve as factual context; and (C) that pending California legislation — specifically Senate Bill 699 and Assembly Bill 1076 — reflects an intensifying public policy against non-competes that should inform the Court's analysis. This memorandum analyzes each of these arguments in turn and provides an assessment of the likely hearing outcome and our recommended course of action.
II. Argument A — Chilling Effect on Aldrich's Right to Pursue Employment
A. Summary of Aldrich's Argument
Aldrich's first and most forcefully presented argument is that any reference to Section 9.1 of the Employment Agreement in AMA's pleadings — even when characterized as mere "factual context" and even when AMA expressly disclaims enforcement — has a chilling effect on Aldrich's constitutional and statutory right to pursue employment in the unscripted and reality television industry. This argument occupies approximately six pages of the Reply Brief and is the focal point of Aldrich's counsel's advocacy.
Section 9.1 of the Employment Agreement, as executed on September 5, 2017, and as amended on August 1, 2020, provides that for a period of eighteen (18) months following the termination of Aldrich's employment with AMA, Aldrich shall not directly or indirectly render services to, or become employed by, any "Competing Enterprise." The Employment Agreement defines "Competing Enterprise" as any entity that derives twenty-five percent (25%) or more of its annual revenue from the production, licensing, or distribution of unscripted or reality television content in the North American market. Given the structure of the unscripted television industry, this definition encompasses virtually all of the major production companies, studios, and streaming platforms that would be likely employers for a senior executive of Aldrich's profile and experience.
Aldrich's counsel relies principally on Edwards v. Kraft Quill CPAs LLP (2008) 44 Cal.4th 937, 947, in which the California Supreme Court reaffirmed the broad scope of Section 16600 and held that California's public policy protects "every citizen's right to pursue any lawful employment and enterprise of his or her choice." Aldrich's Reply characterizes AMA's "factual context" argument as a transparent attempt to leverage the non-compete as a litigation weapon and marketplace signal while simultaneously disclaiming any intent to enforce it. Whitfield and Nazarian argue that the mere presence of Section 9.1 in AMA's Cross-Complaint — regardless of disclaimers — sends a signal to potential employers, talent agencies, and industry participants that AMA views Aldrich as contractually constrained, thereby discouraging third parties from engaging or hiring him.
The Reply Brief further argues that AMA's so-called "alternative proposal" — offering to remove Section 9.1 from the caption of the First Cause of Action while retaining substantive references in the body of the pleading — is insufficient to eliminate the chilling effect. Aldrich's counsel characterizes this as a "cosmetic revision" that does not address the fundamental harm. The Reply contends that as long as Section 9.1 appears anywhere in AMA's Cross-Complaint, the damage to Aldrich's employment prospects persists, particularly in an industry where cross-complaint filings and associated pleadings are closely monitored by competitors, talent representatives, and trade press.
B. Our Assessment
This is Aldrich's strongest argument, and we should not underestimate the receptivity of a Los Angeles Superior Court judge — particularly one with experience in employment litigation — to the chilling-effect theory. California courts have been increasingly protective of employee mobility, and the policy articulated in Edwards carries significant weight.
The California Supreme Court in Edwards confirmed that Business and Professions Code Section 16600 broadly invalidates non-competition agreements, subject only to narrow statutory exceptions codified in Sections 16601 (sale of business goodwill), 16602 (dissolution of partnership), and 16602.5 (dissolution of limited liability company). Edwards, 44 Cal.4th at 945. None of these statutory exceptions applies to Aldrich's employment relationship with AMA. The Edwards court expressly rejected the so-called "narrow restraint" or "trade secret" exception that some earlier Court of Appeal decisions had recognized, making clear that the statutory framework does not permit judicially-created carve-outs from Section 16600's broad prohibition. Id. at 946-948.
There is no question that Section 9.1, standing alone, is void and unenforceable under California law. The relevant question before the Court is whether AMA may reference a void contractual provision in its pleadings for purposes other than enforcement — specifically, as factual context relevant to the CUTSA "reasonable efforts" element and the broader restrictive covenant framework surrounding the confidentiality obligations Aldrich allegedly breached.
AMA's position is strengthened considerably by the fact that AMA has already expressly offered to amend the Cross-Complaint to clarify that it is not seeking injunctive or monetary relief based on Section 9.1. This voluntary concession should substantially mitigate the chilling-effect concern. If AMA's pleadings affirmatively state that AMA does not seek to enforce Section 9.1 and does not seek any relief premised on the non-compete, the risk that the pleadings will be interpreted by third parties as a signal that AMA is actively restraining Aldrich's employment is materially reduced.
The Court should take this concession into account in evaluating Aldrich's argument. There is a meaningful difference between a cross-complaint that asserts a non-compete claim — seeking to enjoin a former employee from working for competitors — and a cross-complaint that references the existence of a non-compete clause within a broader restrictive covenant framework for the limited purpose of demonstrating what protective measures the employer implemented. AMA is not "asserting" a non-compete claim in any operative sense; it is describing the contractual environment in which Aldrich was employed and from which AMA's protectable interests arise.
That said, Aldrich's argument has force. A court sympathetic to employee mobility concerns may conclude that any pleading reference to an unenforceable non-compete carries an inherent chilling effect, regardless of disclaimers. In such an environment, even a well-crafted disclaimer may be viewed as insufficient. The risk is amplified by the practical reality that court filings are public records, and industry participants may draw inferences from the mere presence of non-compete language in AMA's pleadings without parsing the legal disclaimers.
Risk Assessment: Moderate. The Court may find some continuing chilling effect despite AMA's concession, but AMA's voluntary offer to amend should satisfy the Court if AMA's counsel presents it effectively at the hearing. The key is to frame AMA's position as one of transparency and good faith — acknowledging that Section 9.1 is not the basis for any claim, while preserving AMA's right to describe the factual landscape in which Aldrich's alleged misconduct occurred.
III. Argument B — Section 9.1 Cannot Be Used as "Factual Context" for CUTSA Claims
A. Summary of Aldrich's Argument
Aldrich's second argument focuses on the relationship between Section 9.1 and AMA's Second Cause of Action for Misappropriation of Trade Secrets under the California Uniform Trade Secrets Act, California Civil Code Section 3426 et seq. Aldrich contends that Section 9.1 is legally irrelevant to AMA's CUTSA claims and therefore cannot be retained in the Cross-Complaint even in the guise of "factual context."
The core of Aldrich's argument is that CUTSA provides its own self-contained statutory framework for the protection of trade secrets, independent of contractual non-competition provisions. Under CUTSA, a plaintiff must demonstrate that (i) the information at issue constitutes a "trade secret" within the meaning of Civil Code Section 3426.1(d) — i.e., information that derives independent economic value from not being generally known and is the subject of efforts reasonable under the circumstances to maintain its secrecy — and (ii) the defendant engaged in "misappropriation" as defined in Civil Code Section 3426.1(b) — i.e., acquisition by improper means or disclosure or use without consent. Aldrich argues that the existence of a void non-competition clause proves nothing about either of these elements. Whether AMA's information constitutes a trade secret, and whether Aldrich misappropriated it, are questions that are answered entirely within the CUTSA framework and do not require or permit reference to an unenforceable contractual provision.
Aldrich's Reply further contends that allowing AMA to use Section 9.1 as "factual context" for CUTSA claims conflates two distinct legal concepts: the contractual enforceability of a restrictive covenant and the statutory protection of trade secrets. Aldrich argues that AMA is attempting to import the stigma of a non-compete into a trade secret case, thereby creating an impression that Aldrich was subject to binding restrictions on his employment when, as a matter of California law, he was not.
B. Our Assessment
This is a substantially weaker argument, and we believe the Court is unlikely to accept it. The reason is straightforward: under CUTSA, one of the essential elements that AMA must prove is that it took "efforts that are reasonable under the circumstances to maintain [the] secrecy" of its trade secrets. Cal. Civ. Code § 3426.1(d)(2). The existence of contractual provisions designed to protect confidential information — including restrictive covenant provisions — is directly relevant to this element.
The restrictive covenant provisions in Section 9 of the Employment Agreement constitute part of AMA's overall program of trade secret protection. Section 9 is a comprehensive framework that includes four distinct restrictive covenants:
•  Section 9.1: Non-competition (18 months post-termination; prohibits work for any "Competing Enterprise" deriving ≥ 25% of revenue from unscripted/reality television in North America);
•  Section 9.2: Non-solicitation of employees (24 months post-termination; prohibits soliciting or inducing any AMA employee to leave AMA's employment);
•  Section 9.3: Non-solicitation of business relationships (24 months post-termination; prohibits soliciting or interfering with AMA's relationships with clients, talent, networks, and business partners);
•  Section 9.4: Confidentiality (indefinite duration; prohibits disclosure or use of AMA's proprietary and confidential information at any time during or after employment).
These provisions, taken together, demonstrate AMA's intent and efforts to protect its proprietary information. While Section 9.1 may be unenforceable as an independent restriction on Aldrich's employment, its inclusion in the Employment Agreement is nonetheless probative of the comprehensive approach AMA took to safeguarding its trade secrets. The existence of a multi-layered restrictive covenant framework — encompassing non-competition, non-solicitation, and confidentiality obligations — is evidence that AMA did not merely rely on informal understandings or ad hoc measures but instead implemented a structured, contractual program to protect its sensitive business information.
California courts have recognized the relevance of non-compete agreements in CUTSA cases for precisely this purpose. In FLIR Systems, Inc. v. Parrish (2009) 174 Cal.App.4th 1270, 1278, the Court of Appeal held that restrictive covenant provisions are relevant to the "reasonable efforts" element of a trade secret claim. The court in FLIR Systems acknowledged that the enforceability of a particular covenant is a separate question from its relevance as evidence of the employer's protective measures. An employer that includes a non-competition clause in its employment agreements — even one that may ultimately be unenforceable under the governing jurisdiction's law — has taken a concrete step to communicate to its employees that it considers certain information and competitive activities to be restricted. That communication, and the contractual framework in which it is embedded, is relevant evidence of reasonable efforts to maintain secrecy.
In this case, AMA's proprietary information at issue includes, among other things:
•  Proprietary show format bibles for Apex Endurance, The Remix, and Untamed West;
•  The Summit Challenge revenue model and associated financial projections;
•  Audience analytics data and methodologies;
•  Talent deal terms, compensation structures, and negotiation strategies.
The evidence developed in discovery to date indicates that Aldrich transmitted materials containing this proprietary information to Halcyon Creek Productions LLC (via the email address info@halcyoncreekprod.com) and to his personal email account (galdrich.private@Northgate Software.com). The question of whether AMA took reasonable efforts to protect this information is central to AMA's CUTSA claim, and the existence of the Section 9 restrictive covenant framework — including Section 9.1 — is directly probative of that issue.
The critical distinction that AMA must emphasize is the difference between enforcement and evidentiary use. AMA is not asking the Court to enforce Section 9.1 against Aldrich. AMA is not seeking an injunction preventing Aldrich from working for competitors. AMA is citing Section 9.1 as one component of its comprehensive program of trade secret protection — a program that also includes the confidentiality provision in Section 9.4, the non-solicitation provisions in Sections 9.2 and 9.3, the Acceptable Use and Confidentiality Policy, and the acknowledgment Aldrich signed on April 12, 2021. This is a permissible evidentiary use that is well within the scope of what CUTSA contemplates in requiring proof of "reasonable efforts."
Aldrich's argument essentially asks the Court to hold that because a particular contractual provision is unenforceable, it ceases to exist as a fact — that it cannot be referenced in any pleading for any purpose. This is an overbroad proposition that finds no support in the case law. Unenforceable contract provisions are routinely referenced in litigation for range purposes, including to establish the parties' intent, to describe the contractual framework governing the relationship, and to demonstrate the scope of protective measures an employer implemented.
Risk Assessment: Low. The Court is unlikely to accept Aldrich's argument that Section 9.1 is wholly irrelevant to AMA's CUTSA claims. The "reasonable efforts" element of CUTSA provides a clear and well-established basis for retaining references to the restrictive covenant framework, and the FLIR Systems authority directly supports AMA's position. We expect the Court to draw the distinction between enforcement and evidentiary use, particularly given AMA's express disclaimer of any intent to enforce Section 9.1.
IV. Argument C — SB 699 and AB 1076 as Further Grounds for Striking Section 9.1 References
A. Summary of Aldrich's Argument
Aldrich's third argument invokes pending California legislation — specifically Senate Bill 699 ("SB 699") and Assembly Bill 1076 ("AB 1076") — as further grounds for striking all references to Section 9.1 from AMA's Cross-Complaint.
SB 699, which upon enactment will be codified as California Business and Professions Code Section 16600.5, is scheduled to become effective on January 1, 2024. The bill provides, among other things, that it shall be unlawful for an employer to "enter into or attempt to enforce a noncompete agreement regardless of whether the contract was signed and the employment was maintained outside of California." Aldrich's counsel argues that SB 699 reflects the California Legislature's clear and intensifying commitment to eradicating non-competition agreements from employment relationships, and that this legislative intent should inform the Court's analysis of the present motion even though the statute is not yet in effect.
Aldrich's Reply also references AB 1076, a companion bill that reinforces the existing prohibition in Section 16600. Together with SB 699, AB 1076 will impose an affirmative obligation on employers to notify all current and former employees — specifically, those who were employed after January 1, 2022 — that any non-competition clause in their employment agreement is void and unenforceable under California law. Aldrich argues that this notification requirement underscores the Legislature's judgment that the mere existence of non-compete provisions in employment agreements causes harm, even when the provisions are not actively enforced.
Aldrich's counsel contends that the combination of existing law (Section 16600 and Edwards) and the imminent legislative enactments (SB 699 and AB 1076) compels the Court to take the strongest possible position against non-compete references in pleadings and to strike all references to Section 9.1 from AMA's Cross-Complaint without exception.
B. Our Assessment
This argument is premature and should be given little weight by the Court. The fundamental problem with Aldrich's reliance on SB 699 and AB 1076 is that neither statute is yet in effect. SB 699 has an effective date of January 1, 2024, which is approximately nine months after the filing of the Reply Brief and the anticipated hearing date. AB 1076 is on the same timeline. Courts decide motions based on the law in effect at the time of the ruling, not on the basis of prospective legislation that has been passed but has not yet taken effect. A court cannot apply a statute that does not yet exist as operative law.
While it is certainly true that the Court may take judicial notice of the legislative trend as additional context for California's strong and well-established anti-non-compete public policy, this is different from applying a prospective statute as a basis for granting a motion. The existing legal framework — Section 16600 as interpreted by Edwards — is already robust, and AMA has already conceded that Section 9.1 is unenforceable. The question before the Court is not whether Section 9.1 is enforceable (all parties agree it is not), but whether AMA may reference an unenforceable provision as factual context in support of its other claims. SB 699 and AB 1076 do not address this specific question.
Moreover, even under the forthcoming legislation, there is an important distinction between "attempting to enforce" a non-competition agreement — which SB 699 would prohibit — and citing the existence of a non-competition provision as evidence of an employer's reasonable efforts to protect trade secrets. AMA is not "attempting to enforce" Section 9.1 by referencing it in its Cross-Complaint as factual context for its CUTSA claim. AMA has expressly disclaimed enforcement. The use of Section 9.1 as evidence of a protective framework is analytically distinct from the conduct that SB 699 targets, and we believe this distinction would hold even after SB 699 becomes effective.
That said, we should be mindful of the fact that the legislative trend may influence the Court's overall disposition. A judge who is aware that the Legislature is on the verge of enacting even stronger protections against non-compete agreements may be more inclined to view AMA's references to Section 9.1 with skepticism, even if the prospective statutes do not technically apply to the pending motion. This is a matter of judicial temperament and inclination rather than legal compulsion, and it is difficult to predict with certainty. Our experience before Judge Villanueva suggests she is methodical in applying the law as it exists and is unlikely to base a ruling on legislation that has not yet taken effect, but the broader policy environment is worth noting.
Risk Assessment: Low. The Court is very unlikely to grant the Motion to Strike based on legislation that is not yet effective. However, the legislative trend reinforces the general policy environment that favors employee mobility and disfavors non-compete provisions, and this may subtly influence the Court's overall approach to the motion. We should be prepared to address the SB 699 argument at the hearing by emphasizing the distinction between enforcement and evidentiary use, and by noting the temporal inapplicability of the prospective statute.
V. Additional Observations on Aldrich's Reply
In addition to the three principal arguments analyzed above, we note several additional observations regarding Aldrich's Reply Brief that are relevant to our preparation for the hearing.
A. Aldrich's Own Declaratory Relief Claim
A significant and, in our view, underexploited point is that Aldrich himself has placed the enforceability of the Section 9 restrictive covenants squarely at issue in this litigation. The Fourth Cause of Action in Aldrich's Complaint — filed on November 14, 2022 — seeks declaratory relief under Code of Civil Procedure Section 1060, specifically requesting a judicial declaration that Section 9.1 (the non-competition clause), Section 9.2 (the employee non-solicitation clause), and Section 9.3 (the business non-solicitation clause) are void and unenforceable under California Business and Professions Code Section 16600. Aldrich's declaratory relief claim asks the Court to adjudicate the legal status of these very provisions.
It is difficult to reconcile Aldrich's request that the Court strike all references to Section 9.1 from AMA's Cross-Complaint with the fact that Aldrich's own Complaint keeps Section 9.1 squarely before the Court. AMA is entitled to reference and respond to the very provisions that Aldrich has affirmatively challenged. If the Court were to grant Aldrich's Motion to Strike in full — eliminating all references to Section 9.1 from AMA's Cross-Complaint — while Aldrich's declaratory relief claim remains pending, the result would be an asymmetric pleading framework in which Aldrich is free to litigate the enforceability of Section 9.1 but AMA is prohibited from even mentioning the provision in its responsive pleading. This would be manifestly prejudicial to AMA.
Aldrich's Reply Brief does not adequately address this asymmetry. The Reply contains a brief footnote suggesting that Aldrich's declaratory relief claim is "distinct" from AMA's use of Section 9.1 in the Cross-Complaint, but it does not explain how the Court could logically prohibit AMA from referencing a provision that is the express subject of Aldrich's own cause of action. This is a significant weakness in Aldrich's Reply, and we should be prepared to emphasize it at the hearing.
B. Choice-of-Law Dimension
We note that Aldrich's Reply Brief does not engage with the choice-of-law issue arising from Section 14.3 of the Employment Agreement. Section 14.3 contains a governing law provision selecting New York law as the law applicable to the interpretation and enforcement of the Employment Agreement. As discussed in our separate memorandum dated December 22, 2022, while New York law is more permissive of post-employment restrictive covenants than California law, a California court adjudicating a dispute involving a California-based employee and California-based employer will almost certainly apply California law under the Restatement (Second) of Conflict of Laws Section 187(2) framework. Under that framework, the chosen law will not be applied if (a) the chosen state has no substantial relationship to the parties or the transaction, or (b) application of the chosen law would be contrary to a fundamental policy of a state whose law would otherwise apply and that state has a materially greater interest in the issue. California's prohibition on non-competition agreements under Section 16600 has been recognized as reflecting a "fundamental policy" for purposes of Section 187(2), and California's interest in protecting the mobility of a California-based employee is materially greater than New York's interest in applying its own more permissive framework.
The fact that Aldrich's Reply does not press the choice-of-law argument suggests that Aldrich's counsel is confident that the Court will apply California law to the enforceability of Section 9.1. This is consistent with our own assessment and confirms that the choice-of-law issue is unlikely to be a contested point at the hearing. For AMA's purposes, this is a neutral development — AMA has already conceded that Section 9.1 is unenforceable under California law, and the application of California law does not affect AMA's argument that Section 9.1 may be referenced as factual context for the CUTSA claim.
C. Procedural Limitations of the Motion to Strike
A final observation concerns the procedural posture of Aldrich's motion. Under California Code of Civil Procedure Section 436, a motion to strike is limited in scope to striking "irrelevant, false, or improper matter" from a pleading, or matter that is "not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court." The motion to strike is a procedural mechanism with a narrow function; it is not a vehicle for testing the merits of individual allegations or for obtaining substantive rulings on the enforceability of contract provisions.
The Court of Appeal addressed this distinction in PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1683, holding that a motion to strike is not a substitute for a demurrer and should not be used to challenge the legal sufficiency of individual factual allegations. Factual allegations that provide context for properly pled causes of action are not "irrelevant" within the meaning of Section 436 merely because they reference a contractual provision that may be unenforceable. The question of whether Section 9.1 is enforceable is a merits question that goes to the ultimate disposition of AMA's claims and Aldrich's declaratory relief claim — it is not the type of question that a motion to strike is designed to resolve.
Aldrich's Reply effectively asks the Court to use the motion to strike as a vehicle for a premature merits determination on Section 9.1's enforceability. While the unenforceability of Section 9.1 is not seriously in dispute, the procedural mechanism Aldrich has chosen is not well-suited to the relief he seeks. The proper remedy, if Aldrich believes that AMA's references to Section 9.1 are legally insufficient to support any cause of action, would be a demurrer — not a motion to strike. This procedural objection provides an additional basis for the Court to deny the motion in part, and we should be prepared to raise it at the hearing if the opportunity arises.
VI. Predicted Outcome
Based on our analysis of Aldrich's three principal arguments, AMA's Opposition and alternative proposal, and the relevant legal authorities, we predict the following outcome at the hearing:
Most likely result: The Court will grant the Motion to Strike in part and deny it in part.
Grant in part: The Court will likely require AMA to remove Section 9.1 from the caption of the First Cause of Action (Breach of Employment Agreement) and to add an express clarification that AMA does not seek injunctive or monetary relief based on the enforcement of Section 9.1. This is consistent with the alternative proposal AMA itself offered in its Opposition, and the Court is likely to view AMA's voluntary concession as a reasonable resolution of the chilling-effect concern. By removing Section 9.1 from the caption and adding an enforcement disclaimer, AMA eliminates the primary basis for Aldrich's argument that the Cross-Complaint signals an active non-compete claim to employers and industry participants.
Deny in part: The Court will likely allow AMA to retain references to Section 9.1 in the body of the Cross-Complaint as factual context relevant to the broader Section 9 restrictive covenant framework and AMA's demonstration of "reasonable efforts" to protect its trade secrets under CUTSA. The Court will likely find that the existence of Section 9.1 within the Employment Agreement's comprehensive restrictive covenant framework is relevant — not for purposes of enforcement — but as evidence of AMA's comprehensive approach to protecting its confidential information, including its proprietary show format bibles (for Apex Endurance, The Remix, and Untamed West), the Summit Challenge revenue model, audience analytics data, and talent deal terms. The FLIR Systems authority directly supports this conclusion, and Aldrich's Reply does not offer a persuasive distinction of that case.
This predicted outcome is consistent with AMA's alternative proposal as set forth in its Opposition and does not materially prejudice AMA's litigation position. AMA's core claims — breach of Section 9.4 (the indefinite confidentiality provision), CUTSA misappropriation of trade secrets, breach of fiduciary duty, and conversion — do not depend on enforcing the non-competition clause. The substantive strength of AMA's case rests on the evidence of Aldrich's unauthorized transmission of proprietary materials and his breach of the confidentiality obligations that remain enforceable under California law.
We acknowledge a secondary possibility that the Court could grant the motion in full, striking all references to Section 9.1 from the Cross-Complaint. This outcome is less likely but not impossible, particularly if the Court is strongly influenced by the chilling-effect argument and concludes that no amount of disclaimer language can cure the harm caused by referencing a void non-compete in a public pleading. If this occurs, AMA's CUTSA claim would not be materially impaired — AMA can still establish "reasonable efforts" through reference to Section 9.4 (confidentiality), Sections 9.2 and 9.3 (non-solicitation), the Acceptable Use and Confidentiality Policy, and other protective measures — but the evidentiary presentation would be somewhat less comprehensive.
VII. Recommendations
Based on the foregoing analysis, we recommend the following actions in preparation for and following the hearing on Aldrich's Motion to Strike:
1. Prepare Amended Cross-Complaint. We should have a draft Amended Cross-Complaint prepared and ready for immediate filing in the event the Court grants the Motion to Strike in whole or in part. The amended pleading should incorporate the following modifications:
(a) Remove Section 9.1 (non-competition) from the caption of the First Cause of Action (Breach of Employment Agreement), so that the claim is expressly limited to breach of Section 9.4 (confidentiality) and, to the extent separately actionable, Sections 9.2 and 9.3 (non-solicitation);
(b) Add a clear and unambiguous statement — in the introductory paragraphs or in a prefatory clause to the First Cause of Action — that AMA does not seek injunctive or monetary relief based on the enforcement of Section 9.1 and does not contend that Section 9.1 is enforceable under California law;
(c) Retain references to the Section 9 restrictive covenant framework, including Section 9.1, in the factual allegations of the Cross-Complaint as context for AMA's demonstration of "reasonable efforts" to protect trade secrets under CUTSA and as background for the breach of Section 9.4;
(d) Continue to assert the remaining three causes of action — CUTSA misappropriation of trade secrets, breach of fiduciary duty, and conversion — without modification.
A draft of this Amended Cross-Complaint should be circulated internally for review by no later than March 22, 2023, so that it is available for filing promptly after the hearing.
2. Preparation for the Hearing. If the Court questions AMA's position at the hearing, AMA's counsel should be prepared to emphasize the following points:
(a) AMA's voluntary offer to amend the Cross-Complaint — removing Section 9.1 from the First Cause of Action caption and adding an express enforcement disclaimer — demonstrates good faith and a willingness to address Aldrich's legitimate concerns about the chilling effect of non-compete references;
(b) Aldrich's own Fourth Cause of Action for declaratory relief keeps Section 9.1 squarely at issue in this litigation. AMA must be permitted to reference and respond to the very provision that Aldrich has affirmatively challenged. Striking AMA's references to Section 9.1 while Aldrich's declaratory relief claim remains pending would create an asymmetric and prejudicial pleading framework;
(c) The FLIR Systems, Inc. v. Parrish authority directly supports AMA's position that non-compete provisions are relevant to the CUTSA "reasonable efforts" element, even when those provisions are not independently enforceable. The existence of a comprehensive restrictive covenant framework — of which Section 9.1 is one component — is probative of AMA's efforts to protect the secrecy of its proprietary information;
(d) Aldrich's reliance on SB 699 and AB 1076 is premature, as neither statute is yet in effect. The Court should decide the motion based on the law as it exists, not on prospective legislation.
3. Strategic Note on Going-Forward Restrictive Covenant Posture. Consistent with our prior analysis set forth in the memorandum dated December 20, 2022, AMA should not attempt to enforce Section 9.1 in any context — whether in this litigation, in settlement discussions, or in communications with third parties. AMA's litigation posture is strongest when it focuses on protectable interests that California law recognizes and enforces: the indefinite confidentiality obligation under Section 9.4, the CUTSA trade secret framework, and the breach of fiduciary duty claim arising from Aldrich's unauthorized transmission of proprietary materials.
In settlement discussions, AMA should be prepared to concede Section 9.1's unenforceability and focus negotiating leverage on the following:
(a) Meaningful protections for proprietary and confidential information under Section 9.4, which imposes an indefinite obligation and is enforceable under California law;
(b) Non-solicitation protections under Sections 9.2 (employee non-solicitation, 24-month duration) and 9.3 (business relationship non-solicitation, 24-month duration), the enforceability of which under California law is a closer question but which may be defensible under the right circumstances, particularly if narrowly drawn;
(c) Recovery of or injunctive relief concerning the specific proprietary materials that Aldrich transmitted to Halcyon Creek Productions LLC, a California limited liability company formed on February 14, 2022, by Nina Castellanos. Castellanos is Aldrich's former business associate and a former AMA Director of Development who departed AMA's employment in January 2022. The formation of Halcyon Creek Productions approximately one month after Castellanos's departure, and the subsequent transmission of AMA proprietary materials to Halcyon Creek's corporate email address, form the factual core of AMA's trade secret and conversion claims.
By conceding the unenforceability of Section 9.1 and focusing on protectable interests, AMA builds credibility with the Court and focuses its litigation resources on claims that have both legal merit and practical value. The unauthorized transmission of proprietary show format bibles, revenue models, audience analytics, and talent deal terms to a competing production venture is the heart of this case — and it does not require enforcement of a non-compete to succeed.
Please contact me to discuss this analysis at your convenience. I will circulate a draft of the Amended Cross-Complaint by end of week for your review.
Nadia Petrov Associate Calderwood & Harkness LLP
By: ________
Date: ________
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