Filed 8/19/26 CBD Franchising v. One Day Doors & Closets CA2/2 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
CBD FRANCHISING, INC., B342711
Plaintiff and Appellant, (Los Angeles County Super. Ct. No. 22STCV13457)
v.
ONE DAY DOORS & CLOSETS, INC., et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County, Jon R. Takasugi, Judge. Affirmed.
Reeder McCreary, Christopher S. Reeder, Benjamin S.
Tragish and Marcus L. Tippens for Plaintiff and Appellant.
Peterson & Watts Law Group, Glenn W. Peterson; and C. Athena Roussos for Defendants and Respondents.
_______________________________
Plaintiff CBD Franchising, Inc. (CBDF) appeals the trial court’s grant of summary judgment on its complaint against defendants One Day Doors & Closets, Inc., and One Day Enterprises, LLC (together, One Day). For the reasons that follow, we affirm.
BACKGROUND
CBDF is a franchisor of “Closets By Design” businesses, which specialize in the sale of custom closets, custom home and office organizers, and other customized organizer services. CBDF is incorporated and headquartered in California but conducts business nationwide.
One Day is primarily engaged in the production and sale of interior door slabs. It uses licensees to distribute its products. Although it does not manufacture or sell custom closet products or services, some of its distributors purchase those products from a third party, Whip’s Carpentry, and One Day advertises Whip’s Carpentry products “as a courtesy” to its distributors that also sell them.
This litigation between CBDF and One Day arises from their respective relationships with William and Mary Conway, a married couple who live in New Jersey.
In 2013, the Conways entered into a franchise agreement with CDBF (the Franchise Agreement) to establish and operate a Closets By Design business in five contiguous New Jersey counties: “Mercer, Monmouth, Ocean, Burlington and Camden.” The agreement defines these counties as the Conways’ “Territory.” Two provisions of the 2013 Franchise Agreement are important to the present dispute.
First, section 13.02, entitled “Post-Term Covenant Not to Compete,” prohibits the Conways, “for a period of two years
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immediately following the . . . assignment or termination of th[e] [Franchise] Agreement,” from “engag[ing] in any other Competitive Business . . . .” Section 13.01 defines “Competitive Business” to include the offer or sale of “custom closet services or products or other customized home organizer services or products.” Section 13.02 goes on to prohibit the Conways from engaging in any such business within, or within 75 miles of, their Territory or any other territory licensed to a Closets By Design franchisee for a period of two years.
Second, the Franchise Agreement contains a choice-of-law provision specific to the noncompete covenant. Section 23.05 states, in relevant part, “the laws of the State of the Territory govern all issues involving . . . the non-competition covenants set forth in [s]ection[s] 13.01 and 13.02 . . . .”
In April 2015, CBDF sent the Conways a notice terminating the Franchise Agreement. According to the notice, the Conways had not complied with certain reporting and royalty payment obligations. The notice provided “the Franchise Agreement is hereby terminated immediately” and nothing contained in the notice would “excuse any post termination obligation of [the Conways].”
Nevertheless, and in order to facilitate a potential sale of the assets of the Conways’ Closets By Design business to a third party, CBDF gave the Conways a limited license to continue operating it. Although the limited license agreement recited “CBDF terminated the Franchise Agreement” the same day, the Franchise Agreement was incorporated by reference into the limited license agreement. The limited license was revocable by CBDF and renewable at its option for 30-day periods.
CBDF renewed the limited license agreement several times. The Conways continued to operate their Closets By Design
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business into June 2016. In March 2016 the Conways, together with their operating company Closets By Design South Jersey LLC, entered into an asset purchase agreement (APA) with DenMatt Industries, LLC (DenMatt). The APA provided for the sale to DenMatt of the equipment, furniture and fixtures, miscellaneous assets, and goodwill of the business. The APA did not specifically identify franchise rights as property to be transferred. Rather, it was a condition to closing that the parties obtain CBDF’s approval of the APA and that “[DenMatt] and [CBDF] shall have entered into the then current form of Franchise Agreement for the operation of the Business . . . .” The Conways further agreed they would not compete with DenMatt for a period of two years within five miles of the territory of their business. That territory was defined in the APA as just three— Mercer, Monmouth, and Ocean—of the five New Jersey counties composing the Territory in the Franchise Agreement.
In June 2016, CBDF consented to the transfer of the Franchise Agreement—notwithstanding its April 2015 termination notice—from the Conways to DenMatt. This consent was memorialized in a document, signed by CBDF, DenMatt, and the Conways, with an effective date of June 21, 2016. By this document, the Conways transferred to DenMatt “all of their rights, duties and obligations under and pursuant to the Franchise Agreement.” The record does not show that DenMatt and CBDF ever entered into the “then current form of Franchise Agreement” as required by the APA. According to CBDF, the consent to transfer document was the means by which DenMatt acquired the right to operate a Closets By Design business.
On October 11, 2016, Mr. Conway entered into a license agreement with One Day permitting him to use the “One Day” trademark to promote and market One Day’s products in
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conducting his “door replacement and closet business.” This license was conditioned on his “selling One Day’s Products exclusively.” Through Central Jersey Doors & Closets, LLC (CJD&C), Mr. Conway, together with Mrs. Conway, proceeded to operate as a “distributor for interior doors [and] closets” from an address in Middlesex county. One Day relayed online inquiries about closet organizer products to CJD&C.
CBDF learned of the Conways’ ongoing business activities.
After some investigation, it sued the Conways, CJD&C, and One Day in New Jersey state court for an injunction. In August 2017, the Conways and CJD&C consented to a preliminary injunction requiring them to comply with the restrictions of the noncompete covenants in the Franchise Agreement through June 22, 2018, but expressly permitting them to continue selling doors and related hardware to the extent not part of a custom closet or other customized home organizer service or product.
One Day continued doing business with the Conways after entry of the consent order. For example, in September 2017, it forwarded the Conways at least two inquiries about closet doors.
CBDF returned to the New Jersey court a few months later to enforce the August 2017 consent order. In an unopposed order dated November 9, 2017, the court ordered the Conways and CJD&C to do and refrain from doing specific acts, including to cease all sales of “custom closets or other home organization systems (including closet doors) as well as all affiliation . . . with [One Day] and use of the word ‘closets’ in any business . . . .”
Invoices issued after entry of the November 2017 enforcement order show One Day continued selling doors to CJD&C. CBDF tells us One Day sent a notice to the Conways terminating their relationship in January 2018, but CBDF’s
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record citation to the purported termination notice directs instead to One Day invoices from November 2017. As of June 2018, One Day was still filling orders the Conways placed before the January 2018 termination notice.
CBDF offers details on the procedural history of the New Jersey case that rely heavily on citations to its own briefing. What we can garner from the evidence is that CBDF added as defendants One Day’s principals, who are California residents, and the Conways asserted the case should have been brought in California under the choice-of-venue provision in the Franchise Agreement. For these reasons, the New Jersey court dismissed the action and directed CBDF to refile it in California.
CBDF refiled its suit in California in April 2022. In doing so, it dropped One Day’s principals as defendants and sued only the Conways, CJD&C, and One Day. Neither the Conways nor CJD&C answered in California and their defaults were taken. One Day appeared and defended the two causes of action CBDF asserted against it: tortious interference with contractual relations and violation of California unfair competition law (UCL; Bus. & Prof. Code, § 17200 et seq.).1 Each was predicated on One Day interfering with the contractual relationship between CBDF and the Conways by doing business with the Conways while they were operating CJD&C in breach of the postterm noncompete provisions of the Franchise Agreement.
In February 2024, One Day moved for summary judgment.
Among the several grounds for its motion was that the postterm noncompete provisions of the Franchise Agreement were unenforceable under section 16600. The trial court granted
1 Undesignated statutory references are to the Business and Professions Code.
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summary judgment on this basis. In reaching this conclusion, the court declined to enforce the parties’ selection of New Jersey law to “govern all issues involving . . . the non-competition covenants . . . .”
After denying CBDF’s motion for reconsideration, the trial court entered judgment. CBDF timely appealed.
DISCUSSION
I. Summary Judgment and Standard of Review “A trial court should grant summary judgment ‘if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ (Code Civ. Proc., § 437c, subd. (c).) A defendant may establish its right to summary judgment by showing that one or more elements of the cause of action cannot be established or that there is a complete defense to the cause of action. (Code Civ. Proc., § 437c, subd. (p)(2).) Once the moving defendant has satisfied its burden, the burden shifts to the plaintiff to show that a triable issue of material fact exists as to each cause of action. (Ibid.) A triable issue of material fact exists where ‘the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.’ ” (Neiman v. Leo A. Daly Co. (2012) 210 Cal.App.4th 962, 967 (Neiman).)
“ ‘We review the trial court’s decision de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections were made and sustained. [Citations.]’ [Citation.] We view the evidence and the inferences reasonably drawn from the evidence ‘in the light most favorable to the opposing party.’ ” (Neiman, supra, 210 Cal.App.4th at pp. 967–968.)
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II. Analysis The central premise of One Day’s summary judgment motion was as follows: One Day could be liable neither for tortious interference with contractual relations nor unlawful business practices because the contract right on which both causes of action were predicated—CBDF’s right to be free of competition from the Conways for two years following their assignment of the Franchise Agreement—is invalid under California law.
There is no dispute that if the contract right is invalid, the causes of action fail. (See Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1141 (Ixchel) [tortious interference with contractual relations requires valid contract between the plaintiff and a third party]; Becerra v. McClatchy Co. (2021) 69 Cal.App.5th 913, 951 [“where . . . a UCL claim is derivative of an underlying violation of law, it must stand or fall with the underlying claim”].)
Therefore, we must first consider which law applies, and then consider whether the Franchise Agreement’s postterm noncompete covenant is enforceable under that law.
A. Nonenforcement of the Parties’ Choice of New Jersey Law
California courts follow section 187 of the Restatement Second of Conflict of Laws (Restatement section 187) in determining whether to enforce a contractual choice of law provision. (Pitzer College v. Indian Harbor Ins. Co. (2019) 8 Cal.5th 93, 100 (Pitzer).)
Under Restatement section 187, subdivision (2), the court must first determine “ ‘(1) whether the chosen state has a substantial relationship to the parties or their transaction, or (2) whether there is any other reasonable basis for the parties’
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choice of law.’ ” (Pitzer, supra, 8 Cal.5th at pp. 100–101.) The burden to make this showing lies with the party seeking enforcement of the contractual choice. (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 917.) If the court finds neither test is met, “ ‘that is the end of the inquiry, and the court need not enforce the parties’ choice of law.’ ” (Pitzer, at p. 101.)
If “ ‘either test is met, the court must next determine whether the chosen state’s law is contrary to a fundamental policy of California. [Fn. omitted.] If there is no such conflict, the court shall enforce the parties’ choice of law. If, however, there is a fundamental conflict with California law, the court must then determine whether California has a “materially greater interest than the chosen state in the determination of the particular issue . . . .” [Citation.] If California has a materially greater interest than the chosen state, the choice of law shall not be enforced . . . .’ ” (Pitzer, supra, 8 Cal.5th at p. 101.) The burden of establishing “ ‘both that the chosen law is contrary to a fundamental policy of California and that California has a materially greater interest in the determination of the particular issue’ ” lies with the party opposing application of the contractually selected law. (Ibid.)
“[W]hether, on undisputed facts, the contractual choice-oflaw provision supplants the law which would otherwise apply is also a question of law reviewed de novo.” (Brack v. Omni Loan Co., Ltd. (2008) 164 Cal.App.4th 1312, 1320.)
Here, it was One Day who opposed application of the parties’ choice of New Jersey law. In its summary judgment motion, it argued that, notwithstanding the Franchise Agreement’s specification of New Jersey law, California law should govern analysis of the issues involving the noncompete provisions.
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One Day did not dispute New Jersey law had a substantial relationship to CBDF’s grant of a franchise to the Conways pursuant to the Franchise Agreement. Rather, it argued only that the postterm noncompete covenant in the Franchise Agreement “violates California’s fundamental policy in favor of free competition.” It then cited three cases—each of which predated our Supreme Court’s adoption of Restatement section 187—suggesting a public policy conflict was an independently sufficient basis for California courts to reject the parties’ choice of law. (Frame v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1971) 20 Cal.App.3d 668, 673 [applying California, rather than New York, law to noncompete clause because “an agreement designating applicable law will not be given effect if it would violate a strong California public policy”]; Scott v. Snelling & Snelling, Inc. (N.D.Cal. 1990) 732 F.Supp. 1034, 1039 [same, quoting Frame, at p. 673]; Hollingsworth Solderless Terminal Co. v. Turley (9th Cir. 1980) 622 F.2d 1324, 1338 [citing Frame, at p. 673]; see also Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, 480, fn. 7 [noting Frame’s analysis did not consider Rest. § 187].)
In its opposition, CBDF did not argue One Day failed to show California had a materially greater interest in the noncompete issue. Instead, it argued only that the noncompete covenant did not offend fundamental California policy.
The trial court elected not to enforce the parties’ choice of New Jersey law based on its concurrence with One Day that its enforcement under the circumstances would violate California’s fundamental policy in favor of free competition. Since neither party had raised whether California had a materially greater interest in the issue than New Jersey, the court did not address it.
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On appeal, CBDF contends the trial court erred in both (i) concluding that enforcing the Franchise Agreement’s postterm noncompete covenant would violate California policy; and (ii) failing to address whether California had a materially greater interest.
1. CBDF Forfeited Its States’-interests Argument by Failing to Raise It Below One Day argues that theories not raised in the trial court generally cannot be asserted for the first time on appeal (citing Gilman v. Dalby (2021) 61 Cal.App.5th 923, 942), and urges us to therefore deem CBDF’s states’-interests argument forfeited. CBDF’s response is twofold: First, that it preserved the argument by stating in opposition to summary judgment, “as the Conways’ Territory was located in New Jersey, New Jersey law applies.” Second, that “[e]ven if the states[’]-interests issue was not fully briefed to the trial court, it does not preclude it from being presented on appeal.”
As to the former point, the mere assertion in the trial court that the Franchise Agreement’s condition for the application of New Jersey law was satisfied did not preserve the specific argument that California did not have a materially greater interest. “[A]n objection suffices to preserve an issue on appeal if it ‘ “fairly inform[s] the trial court, as well as the [opposing] party . . . , of the specific reason or reasons the objecting party believes [a particular ruling should be made], so the [opposing] party . . . can respond appropriately and the court can make a fully informed ruling.” ’ ” (In re A.J. (2019) 39 Cal.App.5th 1112, 1117, quoting People v. Geier (2007) 41 Cal.4th 555, 609.) The choice-of-law analysis under Restatement section 187 requires the court to look beyond the terms of the contract. The statement CBDF says preserved its states’-interests argument gave no hint
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of this, much less informed the court what that analysis entails or what elements of that analysis CBDF believed were, or were not, satisfied.
As to the latter point, while true that CBDF is not precluded from presenting the issue on appeal, it is within our discretion not to consider it. (Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257, 1275, fn. 3 [“Whether an appellate court will entertain a belatedly raised legal issue always rests within the court’s discretion.”].) We exercise our discretion not to consider the issue here.
The rule of forfeiture is “ ‘rooted in the fundamental nature of our adversarial system: The parties must call the court’s attention to issues they deem relevant. “ ‘In the hurry of the trial many things may be, and are, overlooked which could readily have been rectified had attention been called to them. The law casts upon the party the duty of looking after his legal rights and of calling the judge’s attention to any infringement of them.’ ” ’ ” (Meridian Financial Services, Inc. v. Phan (2021) 67 Cal.App.5th 657, 698 (Meridian).) We are therefore “ ‘loath to reverse a judgment on grounds that the opposing party did not have an opportunity to argue and the trial court did not have an opportunity to consider.’ ” (Id. at p. 700.)
It does not matter that One Day bore the burden to show California had a materially greater interest in the issue. In Meridian, the court deemed forfeited an issue the nonmovant plaintiffs in summary judgment proceedings failed to raise in opposition to the motion. It explained, “ ‘[t]hough this court is bound to determine whether defendants met their threshold summary judgment burden independently from the moving and opposing papers, we are not obliged to consider arguments or theories, including assertions as to deficiencies in defendants’
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evidence, that were not advanced by plaintiffs in the trial court.’ ” (Meridian, supra, 67 Cal.App.5th at p. 698.) The same logic applies here.
2. Under the Circumstances, New Jersey’s Noncompete Law Is Contrary to Fundamental California Policy If New Jersey law were to apply, the parties do not dispute the Franchise Agreement’s postterm noncompete covenant would be enforceable. Indeed, the New Jersey court enforced it, without objection from the Conways. This is consistent with the New Jersey rule that its courts will enforce a postterm noncompete covenant in an employment agreement if “reasonable in view of all the circumstances.” (Solari Industries, Inc. v. Malady (1970) 55 N.J. 571, 576.) The covenant is reasonable “if it ‘simply protects the legitimate interests of the employer, imposes no undue hardship on the employee and is not injurious to the public.’ ” (Ingersoll-Rand Co. v. Ciavatta (1988) 110 N.J. 609, 628.)
California takes a different approach. Section 16600, subdivision (a) provides: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” Courts have long recognized this provision reflects a strong California policy in favor of individual freedom to pursue the vocation of one’s choosing. (Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 900 [collecting cases].) And they have strictly enforced it to invalidate agreements not to compete upon the termination of employment, or upon the sale of interest in a business, without inquiring into their reasonableness. (Ixchel, supra, 9 Cal.5th at p. 1151.)
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CBDF acknowledges the difference in approach between California and New Jersey in the employment context but contends the states are more aligned when it comes to noncompete provisions in the business and franchise contexts. In particular, CBDF points to our Supreme Court’s decision in Ixchel, supra, 9 Cal.5th at pages 1148 through 1159 as requiring a liberalized approach to noncompete provisions in business contracts.
Ixchel concerned an agreement between two biotechnology companies, Forward Pharma (Forward) and Biogen, Inc. (Biogen), by which Forward agreed to permanently cut ties with another biotechnology company, Ixchel. (Ixchel, supra, 9 Cal.5th at pp. 1137, 1138–1139.) The Ixchel court held this agreement was not a per se violation of section 16600, even though it had the effect of restraining trade. Rather, it was permissible if reasonable. (Ixchel, at p. 1150.) In reaching this conclusion, the court surveyed prior decisions concerning section 16600 and its predecessor statute. On the one hand, cases involving “agreements not to compete upon terminating employment or selling a business” interpreted these statutes as an absolute bar to enforcement. (Ixchel, at p. 1153.) On the other hand, cases involving “contractual restraints on business operations and commercial dealings” read the statutes as proscribing only unreasonable restraints on trade. (Ixchel, at pp. 1153–1154.)
The cases applying a rule of reason concerned agreements governing an ongoing business relationship. (See Ixchel, supra, 9 Cal.5th at pp. 1155–1156.) Grogan v. Chaffee (1909) 156 Cal. 611, 612–613, involved an agreement between an olive oil producer and a retail grocer setting a minimum retail price for product supplied by the producer. Associated Oil Co. v. Myers (1933) 217 Cal. 297, 299–300, involved an exclusive dealing
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agreement relating to retail gasoline sales on a commercial property.
As the Ixchel court later explained, such agreements can actually serve to promote competition. “Businesses engaged in commerce routinely employ legitimate partnership and exclusive dealing arrangements, which limit the parties’ freedom to engage in commerce with third parties. Such arrangements can help businesses leverage complementary capabilities, ensure stability in supply or demand, and protect their research, development, and marketing efforts from being exploited by contractual partners.” (Ixchel, supra, 9 Cal.5th at pp. 1160–1161.) Such arrangements “ ‘enable long-term planning on the basis of known costs,’ ‘give protection against price fluctuations, and . . . offer the possibility of a predictable market.’ ” (Id. at p. 1161.) By way of example, “exclusive dealing arrangements are ‘often a part of a franchise agreement or a distributorship contract,’ ” and, “[i]n exchange of the right to sell the franchisor’s products, franchisees often agree to purchase from a particular supplier or operate in a particular geographic area.” (Ibid.) The Ixchel court “decline[d] to construe section 16600 to call such arrangements into question simply because they restrain trade in some way.” (Ibid.)
CBDF seizes on Ixchel’s deference to certain franchise arrangements as extending to the Franchise Agreement’s postterm noncompete provision. CBDF misreads Ixchel. As Ixchel itself emphasized in parsing noncompete precedents, “ ‘language in a judicial opinion is to be understood in accordance with the facts and issues before the court.’ ” (Ixchel, supra, 9 Cal.5th at p. 1158.) Ixchel concerned, and relied on cases concerning, restrictions governing ongoing business relationships—not restrictions on what individuals could do following the conclusion of a business relationship. Thus, when it announced the rule of
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reason applied to “business operations and commercial dealings,” we construe this holding in light of those facts.2 (Ixchel, at p. 1151.)
The Franchise Agreement’s postterm noncompete covenant bears no resemblance to the exclusivity covenant made as part of Forward and Biogen’s ongoing business relationship in Ixchel. The noncompete served only to prevent the Conways from competing with CBDF after their relationship had ended. It served none of the salutary functions the Ixchel court identified as warranting deference to agreements governing ongoing relationships between businesses.
While it is true the Franchise Agreement is not an employment agreement, and the Conways were never CBDF’s employees, the effect of the postterm noncompete covenant is the same as what our Supreme Court has said section 16600 flatly prohibits: restraining an individual’s ability to engage in trade after the conclusion of a business transaction or relationship. (See Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 948 [invalidating postemployment noncompete “because it restrained [an individual’s] ability to practice his profession”]; Chamberlain v. Augustine (1916) 172 Cal. 285, 288 [invalidating noncompete covenant included in contract for sale of interest in business because it “clearly operate[d] to restrain the [individual] defendant from ‘exercising a lawful profession, trade, or business’ ” following the sale]; Muggill v. Reuben H. Donnelley
2 In doing so, we disagree with the federal district court in Colorado, relied upon by CBDF, which construed a provision prohibiting a franchisee from competing with the franchisor after termination of their agreement as a “business dealing[]”subject to the rule of reason in Ixchel. (See PostNet International Franchise Corp. v. Wu (D.Colo. 2021) 521 F.Supp.3d 1087, 1101–1102.)
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Corp. (1965) 62 Cal.2d 239, 243 [“[T]he provision forfeiting [an individual retiree’s] pension rights if he works for a competitor restrains him from engaging in a lawful business and is therefore void.”].)
For these reasons, we agree with the trial court that applying New Jersey law to the dispute at hand would be contrary to California’s fundamental policy favoring an individual’s right to engage in his chosen trade.
B. The Postterm Noncompete Covenant Is Invalid For the reasons already discussed, the postterm noncompete covenant in the Franchise Agreement purports to restrain the Conways from engaging in a lawful profession, trade or business within the meaning of section 16600 and is not subject to a reasonableness exception under Ixchel.3 CBDF argues that, even if this is so, the provision is exempted by section 16601. We disagree.
As relevant here, section 16601 provides: “Any person who sells the goodwill of a business . . . , or any owner of a business entity selling or otherwise disposing of all of his or her ownership interest in the business entity, or any owner of a business entity that sells . . . all or substantially all of its operating assets together with the goodwill of the business entity . . . may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold, or that of the business entity, division, or subsidiary has been carried on, so long as the buyer, or any person deriving title to the goodwill or ownership interest from the buyer, carries on a like business therein.”
3 We therefore do not address the parties’ reasonableness arguments.
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CBDF argues section 16601 applies to the Franchise Agreement because the Conways sold the goodwill of their business to DenMatt and transferred to DenMatt all of their rights and obligations under the Franchise Agreement. But as One Day observes, the noncompete CBDF seeks to enforce is contained in the Franchise Agreement between CBDF and the Conways, not in the APA between the Conways and DenMatt. Moreover, section 16601 applies to agreements between the seller of goodwill and its buyer. At no point did the Conways sell goodwill to CBDF and at no point did CBDF buy goodwill from the Conways.
CBDF responds to the first issue by claiming the Franchise Agreement, the APA, and the 2016 assignment form a single transaction. Under CBDF’s own articulation of the integration rule, these agreements do not constitute a single transaction. According to CBDF, “[t]wo or more separately executed instruments may be construed as one contract when they deal with the same subject matter and are by reference to one another so connected that they are interdependent.” The subject of the Franchise Agreement was the establishment of a franchisorfranchisee relationship between CBDF and the Conways. The subject of the APA and the 2016 assignment was the sale of the Conways’ business assets, and assignment of their rights under the Franchise Agreement, to DenMatt. And while the 2016 DenMatt transaction documents referred to the Franchise Agreement, the Franchise Agreement, executed three years prior, in no way referenced the later documents, nor was it in any way dependent upon them. The Franchise Agreement and the 2016 DenMatt transaction documents therefore cannot be “interdependent.”
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Even if CBDF were correct that the documents formed an integrated transaction, this would not change that the Conways never sold CBDF, and CBDF never bought from the Conways, the goodwill of any business. Indeed, the Franchise Agreement, by which the Conways acquired from CBDF certain rights to run a Closets By Design business, suggests no goodwill was transferred. Section 15.01 prohibits the Conways from claiming to have acquired any “goodwill . . . in any of [the] Proprietary Marks by virtue of the limited license granted under th[e] [Franchise] Agreement, by virtue of [the Conways’] use of [any of] the Proprietary Marks or otherwise. All of [the Conways’] uses of the Proprietary Marks . . . will inure to [CBDF’s] benefit.”
Under the terms of the APA, the Conways did sell DenMatt goodwill, but CBDF is not DenMatt. Moreover, the Conways and DenMatt did not agree to the same postterm noncompete covenant contained in the Franchise Agreement. Instead, they agreed to a different postterm noncompete which covered a differently defined territory and which is not at issue in this litigation.
Citing Consolidated Photographic Industries v. Marks (1953) 109 Cal.App.2d 310, CBDF argues that section 16601, despite its plain language, can exempt nonbuyers from section 16600’s proscriptions. In that case Marks, an individual, sold his business to Twentieth Century Photo Laboratories, Inc. (Twentieth). As part of the sale, Marks agreed not to compete with Twentieth for five years. Shortly after the sale, Twentieth’s two shareholders, Griffith Photo Service (Griffith) and Monarch Photo Service (Monarch), agreed to divide Twentieth’s assets and continued operating them. (Id. at p. 312.) Within the five-year window in his agreement with Twentieth, Marks started a new company to compete with Griffith and Monarch. The court held
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Griffith and Monarch came “within the letter and spirit of section 16601” as both the successors to Twentieth and the beneficiaries of Marks’ agreement not to compete. (Consolidated, at p. 314.) Indeed, by its terms, section 16601 offers the protection of a postterm noncompete not only to the buyer of goodwill but also to “ ‘any person deriving title to the good will . . . from him.’ ” (Consolidated, at p. 313.) Thus, section 16601 allowed Griffith and Monarch to be free of competition from Marks in accordance with the terms of his agreement with Twentieth. (Consolidated, at p. 314.)
CBDF does not argue it is DenMatt’s successor in interest, but attempts to analogize itself to Griffith and Monarch by noting the Franchise Agreement gave it “contractual rights to enforce the non-compete agreement following a transfer of goodwill.” This is a circular argument. A contractual provision rendered unenforceable under section 16600 does not become enforceable by the contract saying it is. As it is neither a buyer, nor a successor to a buyer, of the Conways’ goodwill, section 16601 is of no benefit to CBDF.
C. Due Process CBDF contends “the trial court permitted One Day to violate CBDF’s due process rights.” According to CBDF, the offensive act was One Day “lodging ‘presentation materials’ on the eve of a summary judgment hearing, and the trial court’s handling of the extraneous materials . . . .” CBDF goes on to explain, “One Day’s 37-pages of ‘presentation materials’ . . . were submitted the afternoon before the initial hearing, and then resubmitted without permission from or request by the Court in advance of the second summary judgment hearing, before CBDF even had a chance to argue.”
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CBDF’s vague assertions fail to show a due process violation. CBDF does not point in their brief to any specific fact in the presentation that was not contained in the separate statement. Nor does it cite any case or statute requiring that all argument must be oral, rather than written. In any event, whatever CBDF complains the trial court did in its “handling of the extraneous materials” One Day submitted, the court expressly did not rely on the “supplemental documents” to which CBDF took exception: “the Court’s decision is based only on the original moving papers, and the points made by both sides in oral argument.”
DISPOSITION
The judgment is affirmed. Costs are awarded to One Day.
RICHARDSON, J.
WE CONCUR:
LUI, P. J.
CHAVEZ, J.