Sidler v. RJT Investment Services CA4/3 ( 2014 )

Filed 11/14/14 Sidler v. RJT Investment Services CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
BARRY V. SIDLER et al.,
Plaintiffs and Appellants, G048968
v. (Super. Ct. No. 30-2013-00635193)
RJT INVESTMENT SERVICES, INC., OPINION
Defendant and Respondent.
Appeal from a judgment of the Superior Court of Orange County, Charles
Margines, Judge. Request for judicial notice. Request denied. Judgment affirmed.
HamptonHolley, George L. Hampton IV and Colin C. Holley for Plaintiffs
and Appellants.
McQueen & Ashman and James A. McQueen for Defendant and
Respondent.
* * *
Plaintiffs Barry V. Sidler (Barry) and BD Sidler, Inc. (Sidler) appeal from a
judgment entered after the trial court confirmed an arbitration award in favor of
defendant RJT Investment Services, Inc. Defendant, who purchased clients, goodwill,
and other assets of Sidler from Barry, prevailed on his claim plaintiffs violated a
noncompetition/nonsolicitation provision of the sales agreement.
Plaintiffs argue the court erred in finding plaintiffs solicited customers in
violation of the noncompetition/nonsolicitation provision. They also argue the provision
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violated Business and Professions Code section 16600, which voids any contract
restraining a person from engaging in a lawful business. They claim the
noncompetition/nonsolicitation provision did not fall within the exception set out in
section 16601. That exception allows parties to an agreement for the sale of a business,
including goodwill, to agree that the seller will not compete so long as certain conditions
are met, including a limited geographic restriction.
We conclude the trial court did not err and affirm.
Plaintiffs also filed a request for us to judicially notice all of their
arbitration exhibits and several other documents. We deny the request because none of
these documents were offered in or considered by the trial court in connection with the
motion to vacate the award.
FACTS AND PROCEDURAL HISTORY
Barry owned Sidler, doing business as Ocean Crest Insurance Agency
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(Ocean Crest), located in Huntington Beach, California. Ocean Crest’s book of business
was comprised of two components: traditional policies issued by Allstate Insurance
Company (Allstate) for automobiles and other vehicles, condominiums and renters,
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All further statutory references are to this code unless otherwise designated.
2
The facts are taken primarily from the arbitrator’s final award and the superior
court’s order denying plaintiffs’ motion to vacate the arbitration award.
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umbrella, and commercial lines; and policies issued by carriers affiliated, but not a part
of, Allstate, including Tower Insurance.
Raymond Tourgeman (Tourgeman) owned defendant RJT Investment
Services, Inc. In about April 2010, Tourgeman contacted Barry about the possibility of
selling Sidler. Thereafter, in July 2010, the parties entered into an Agreement of
Purchase and Sale of Assets (Agreement) for defendant to purchase certain assets,
including the Allstate Business and Tower Insurance policies from plaintiffs. Plaintiffs
retained the rights to all other carriers.
The purchase price was $850,000, consisting of a down payment of
$750,000 in cash and a note for $100,000. The purchase price was allocated as follows:
$420,000 for goodwill; $420,000 for the client list; $5,000 for furniture and equipment;
and $5,000 for a covenant not to compete/nonsolicitation provision
(noncompetition/nonsolicitation provision).
That provision stated: “Seller agrees that he will not at any time within the
five (5) year period, immediately following the closing date, directly or indirectly, engage
in, or have any interest in any person, firm, corporation, or business that engages in, any
activity within a twenty (20) mile radius of the SELLER’S current location at 8907
Warner Avenue, Suite 260, Huntington Beach, California 92647, which activity is the
same as, similar to, or competitive with any activity now engaged in by SELLER so long
as the BUYER shall engage in this activity. [¶] . . . [¶] In addition, SELLER agrees to
not directly or indirectly, on the SELLER’S own behalf or in conjunction with any person
or legal entity, solicit, or induce, or attempt to solicit any policyholders or employees of
SELLER, or induce or attempt to induce, any such policyholders or employees of
SELLER to cease doing business with or being employed by BUYER, or in any way
interfere with the relation between the policyholders or employees, and BUYER.”
In July, after the Agreement was signed but before the close of escrow, and
without defendant’s knowledge, plaintiffs twice sent an automated telephone
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announcement to Ocean Crest’s entire customer list, about 1,700 in number, stating the
following, “All things come to an end. After 40 years of family partnership with Allstate,
I have decided to move forward on my business journey and end my relationship with
Allstate Insurance. This change is effective 8/1/10. Some of you will transition to a new
Allstate agent. Others of you who have products outside of Allstate will continue with
my service and will see no change other than a new office address and telephone number.
[¶] I want you to know that I value the relationship we have had over many years, and if
you have any questions about this change or how it will effect [sic] you, please feel free
to contact me and I will happily answer any questions you have. [¶] My new business
number is 888-291-1625 extension 1. If you don’t reach me please leave a message. I
promise to call back anyone who does have questions about this change. [¶] You can
always visit my website at www.myOcean Crest.com (underscoring omitted) for
additional information, or feel free to send me an email at
barry.sidler@myOceanCrest.com.”
Plaintiffs also sent the same message in an e-mail to approximately 700
people, not all of whom were Allstate customers. The e-mail “featured additional
language in the caption or banner which suggested the recipient consider buying
insurance from [plaintiffs].” When Allstate later questioned Sidler as to whether he had
confidential customer information or had solicited Allstate customers, plaintiffs destroyed
the list of those to whom they had sent the e-mail.
At the same time plaintiffs discovered one of their longtime, key
employees, Harriett Price, was retiring. They therefore twice sent the original automated
call, with additional information about Price’s retirement, to the original recipients.
Plaintiffs’ calls and e-mails caused a “deluge[]” of calls from policyholders
to defendant expressing concern about Sidler’s and Price’s departures. The customers
had questions about whether the agency would remain in business, the identity of their
agent, and whether their policies were still in effect. Sidler and Price explained to the
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callers defendant was taking over the agency as to Allstate and Tower customers. They
also gave them the new contact information for Sidler.
In addition, plaintiffs also set up a new Web site, containing the same
language from the e-mail, including the banner language suggesting customers think
about purchasing insurance from plaintiffs. It also mentioned plaintiffs’ Huntington
Beach address, even though plaintiffs had moved to Sidler’s residence in Mission Viejo.
In July a potential client named Gaye Applegate was referred to plaintiffs.
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They “deferred talking to her” until after escrow closed.
When escrow closed in August, Tourgeman moved into the Huntington
Beach office and began receiving several calls from the recipients of plaintiffs’ e-mails
and automated telephone calls. Tourgeman testified he spent 75 percent of his time
during the first several months of business fielding the calls. The calls all dealt with
customers’ confusion about who, if anyone, was their Allstate agent and if they were
covered by their policies. Tourgeman sent out his own automated telephone message
wherein he introduced himself as the new owner of Ocean Crest, which would continue
to handle their insurance requirements.
In October 2010, plaintiffs sent another e-mail to 65 customers who may or
may not have received the prior phone calls and e-mails. Plaintiffs’ e-mail expressed
their disillusion with Allstate and offered insurance policies from other carriers.
In late 2010 and continuing into 2011, Tourgeman came to the conclusion
plaintiffs had misappropriated some of his Allstate clients. Pursuant to the Agreement,
he filed a demand for arbitration, asserting claims for breach of contract and the covenant
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The arbitrator found this conduct breached the implied covenant of good faith
and fair dealing. The parties include this finding in their discussions although it does not
appear plaintiffs appealed this either in the trial court or here. In the event plaintiffs did
intend to appeal this issue, the claim is waived for failure to properly brief. (Benach v.
County of Los Angeles (2007) 149 Cal.App.4th 836, 852.)
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of good faith and fair dealing, fraud, and unfair competition, seeking damages and
injunctive relief.
In the award (Award) the arbitrator found for defendant on the theories of
breach of contract and breach of the covenant of good faith and fair dealing. As
applicable to this appeal, the arbitrator found plaintiffs interfered with 12 of defendant’s
policyholders, who either received a quote or purchased insurance from plaintiffs, in
violation of the noncompetition/nonsolicitation provision. Based on the language of the
Agreement, policyholders (Policyholders) were defined to mean only those who, at the
close of escrow, owned Allstate or Tower policies or a combination of the two, and did
not own any non-Tower affiliate policies.
Plaintiffs then filed a petition in the superior court to vacate the Award,
arguing the arbitrator erred in ruling the noncompetition/nonsolicitation provision neither
violated section 16600 nor prohibited Sidler from engaging in a lawful profession; and
further erred in finding plaintiffs breached the noncompetition/nonsolicitation provision
by doing business with a few of the Policyholders even though plaintiffs had not solicited
their business but the Policyholders had contacted plaintiffs. In addition to opposing that
motion, defendants filed a motion to confirm the Award.
The trial court granted the motion to confirm. The ruling essentially
repeated the facts as set out in the Award. It also found plaintiffs interfered with
defendant’s business by contacting 12 specified Policyholders who left defendant’s
agency or bought new policies from plaintiffs. Defendant was damaged in the sum of
$19,878 in lost commissions and also incurred $19,603.68 in litigation costs and
$126,147.60 in attorney fees.
The court relied on section 16601, which allows the seller of a business,
including goodwill, to agree to refrain from engaging in a competing business within a
specific geographic area so as to protect the buyer’s investment. It found the
noncompetition/nonsolicitation provision was narrow enough to bar solicitation only of
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existing clients plaintiffs had sold to defendant that held Allstate or Tower policies, or
both. Plaintiffs no longer sold Allstate policies so the only legitimate reason he would
contact these Policyholders would be to introduce them to defendant. An attempt to sell
other insurance products was prohibited competition.
The court was not persuaded by plaintiffs’ argument they were not barred
since they were outside the geographic area as defined in the Agreement. The arbitrator
had found the automated telephone calls and e-mails listed an address within the defined
20-mile radius.
Finally, the court ruled, plaintiffs sold the Allstate client list for $420,000,
and inferred from the price that the information on the list was not readily ascertainable
and was protected information. Aside from relying on the
noncompetition/nonsolicitation provision, the arbitrator was correct in determining
plaintiffs’ “use of the list was independently wrongful and actionable as an interference
with prospective economic advantage.”
DISCUSSION
1. Review of Arbitration Awards
Based on the strong public policy in support of arbitration, courts generally
do not review arbitration awards for factual or legal errors (Jones v. Humanscale Corp.
(2005) 130 Cal.App.4th 401, 407), including sufficiency of the evidence or reasoning of
the arbitrator (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11). Usually arbitration
awards are final. (Id. at p. 10.)
There are, however, limited exceptions to this rule, including where “[t]he
arbitrators exceeded their powers and the award cannot be corrected without affecting the
merits of the decision upon the controversy submitted.” (Code Civ. Proc., §1286.2,
subd. (a)(4).) The “merits” described in this section encompass all contested legal and
factual issues before the arbitrator. (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p.
28.) Within this statutory exception is a claim the Award violated “‘an explicit
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legislative expression of public policy.’” (Ahdout v. Hekmatjah (2013) 213 Cal.App.4th
21, 37; Ahdout.)
Section 16600 states, “Except as provided in this chapter, every contract by
which anyone is restrained from engaging in a lawful profession, trade, or business of any
kind is to that extent void.” “Section 16600 expresses California’s strong public policy
of protecting the right of its citizens to pursue any lawful employment and enterprise of
their choice. [Citations.]” (Dowell v. Biosense Webster, Inc. (2009) 179 Cal.App.4th
564, 575.)
Plaintiffs argue the Award violated section 16600. The trial court relied on
the strong public policy underlying section 16600 to bring this case within the public
policy exception allowing review of the Award; defendants do not dispute
appropriateness of review under this theory.
Under these circumstances the Award is reviewable. (See Ahdout, supra,
213 Cal.App.4th at p. 38 [arbitration award regarding contractor’s state licensing law, an
“‘explicit legislative expression of public policy,’” reviewable].)
A trial court’s review of an arbitrator’s decision is de novo. It must
consider all admissible evidence the parties present, whether or not it was submitted to
the arbitrator. (Ahdout, supra, 213 Cal.App.4th at pp. 39-40.) It must also take into
account the award itself, including any evidence and testimony described therein.
(Lindenstadt v. Staff Builders, Inc. (1997) 55 Cal.App.4th 882, 893, fn. 8.) Thus, the
arbitrator’s findings as to whether plaintiffs solicited their former Policyholders or
interfered with defendant’s business were not binding on the trial court. (Ahdout, supra,
213 Cal.App.4th at p. 39.)
“On appeal from an order confirming an arbitration award, we review the
trial court’s order (not the arbitration award) under a de novo standard. [Citations.] To
the extent that the trial court’s ruling rests upon a determination of disputed factual
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issues, we apply the substantial evidence test to those issues.” (Lindenstadt v. Staff
Builders, Inc, supra, 55 Cal.App.4th at p. 892, fn. 7.)
Plaintiffs, as the parties moving to vacate the Award, have the burden to
show error. (Comerica Bank v. Howsam (2012) 208 Cal.App.4th 790, 826.)
2. Request for Judicial Notice
Plaintiffs filed a request for judicial notice of a number of documents,
primarily exhibits from the arbitration hearing, 82 from plaintiffs’ exhibit list and three
from defendant’s list. The other documents are the demand for arbitration and response
thereto, the interim and amended interim award issued by the arbitrator, defendant’s
motion to be declared the prevailing party, and the results of two Mapquest searches.
In his declaration, counsel states all of the documents were filed in the
arbitration action and served on the opposing party. He also states the documents are
relevant and necessary for us to decide the issues raised in plaintiffs’ briefs because the
documents provide background information and context.
We deny the request. As plaintiffs acknowledge none of these documents
was presented to the trial court. When a petition to set aside an arbitration award is filed,
it is the trial court’s responsibility to review all evidence submitted to it. Here, because
plaintiffs did not submit the evidence to the trial court, the court did not have the
opportunity to consider it. Our de novo review does not extend to review of evidence not
before the trial court. Rather, we only conduct a de novo review of the trial court’s
decision based on what was submitted to it. Therefore, not only do we deny the request
for judicial notice, we will not consider any of the evidence or other documents nor any
of plaintiffs’ arguments supported solely by the documents in the request.
3. Plaintiffs’ Violation of NonCompetion/NonSolicitation Provision
Plaintiffs contend the trial court erred in finding they solicited customers in
violation of the noncompete/nonsolicitation provision in the Agreement. They criticize
the court’s order that stated once plaintiffs “sought to lure [Policyholders] away from
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[defendant, plaintiffs were] competing with [defendant]” as conflicting with the Award’s
language that plaintiffs did not “actually solicit[]” a Policyholder. Rather, plaintiffs urge,
the arbitrator based liability on the language barring plaintiffs from interfering with the
relationship between defendant and the Policyholders. This argument does not persuade.
The arbitrator found plaintiffs sold insurance or gave quotes to
Policyholders. Although he called it interference, the conduct falls within the
noncompetition language of the noncompetition/nonsolicitation provision, which bars
plaintiffs from engaging in a business or activity the same as or similar to defendant’s
business within the specific time and radius limitations spelled out. The trial court
agreed, ruling the “‘no[-]compete’ limitation [was] actually the ‘do not interfere’
provision.”
Plaintiffs’ counsel conceded at argument on the motion to vacate that the
arbitrator did not make any erroneous factual findings. Plaintiffs’ objection to the word
“lure” is merely an exercise in semantics. Use of a different word to describe the conduct
does not change the conduct itself or the findings based thereon.
4. Geographic Radius
Plaintiffs maintain the court erred in finding their wrongful interference
occurred within the 20-mile radius of defendant’s agency. They argue the arbitrator did
not make any findings “as to the location of any of [plaintiffs’] business conduct relating
to any of the 12 customers.” This argument fails factually and legally.
The arbitrator stated that when plaintiffs set up their new Web site they
“alluded to a contact location at the previous Ocean Crest address on Warner in
Huntington Beach, though Mr. Sidler had actually relocated to his home in Mission
Viejo.” In their opening brief plaintiffs acknowledge they had office space in Huntington
Beach until April 2011, eight months after escrow closed. (Sabey v. City of Pomona
(2013) 215 Cal.App.4th 489, 496, fn. 1 [statements in briefs considered admissions
against party].) No one does or reasonably could dispute that a Huntington Beach
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address is within 20 miles of defendant’s agency. And, based on the statement in the
Award that plaintiffs used their Huntington Beach address in their new Web site, it was
reasonable for the trial court to find plaintiffs competed within a 20-mile radius.
Plaintiffs assert the Mission Viejo address is outside the 20-mile limitation,
but there was no evidence to that effect before the trial court, and, consequently, there is
none before us. In fact, there is no evidence this was even contested at the arbitration.
As noted above, plaintiffs had the burden to show the award was erroneous, and did not
do so.
In a related argument, plaintiffs contend the arbitrator erred because he did
not analyze as to each of the 12 Policyholders whether the interference was within the 20-
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mile radius and thus fell within the exception in section 16601. They claim the failure of
the arbitrator to perform this analysis precluded them from offering evidence to prove
they did not solicit their business and also were not within the 20-mile radius. Not so.
Whether the arbitrator performed such an analysis, in connection with their
motion to vacate plaintiffs had the right to introduce evidence to support their claims.
The trial court would have been required to review any admissible evidence they offered.
(Ahdout, supra, 213 Cal.App.4th at pp. 39-40.) We have already determined plaintiffs’
attempt to present such evidence to us via the request for judicial notice is not well taken.
The evidence contained in those documents may have persuaded the trial court to vacate
the Award but because it is not in the record, we may not consider it.
Further, the location of the 12 Policyholders is irrelevant. What is
important is the location of plaintiffs’ business vis-à-vis the location of defendant’s
agency. And the substantial evidence is that location was within the 20-mile radius.
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In conjunction with this argument, relying strictly on the documents included in
the request for judicial notice, plaintiffs claim at least some of the 12 Policyholders
contacted him. But there is no evidence in the record to that effect.
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5. Interference with Prospective Economic Advantage
Because we affirm the finding plaintiffs wrongfully competed as to the 12
Policyholders in breach of the noncompetition/nonsolicitation provision, there is no need
to address this independent ground upon which the trial court confirmed the Award.
DISPOSITION
The judgment is affirmed. The request for judicial notice is denied.
Defendant is entitled to costs on appeal.
THOMPSON, J.
WE CONCUR:
RYLAARSDAM, ACTING P. J.
MOORE, J.
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