Opinion
A165367
09-26-2023
ABD INSURANCE AND FINANCIAL SERVICES, INC., et al., Plaintiffs and Appellants, v. HUB INTERNATIONAL INSURANCE SERVICES, INC., et al., Defendants and Respondents.
NOT TO BE PUBLISHED
Order Filed Date 10/17/23
San Francisco City &County Super. Ct. No. CGC-22-598911
ORDER MODIFYING OPINION AND DENYING REHEARING
THE COURT:
It is ordered that the opinion filed herein on September 26, 2023, be modified as follows:
1. On page 10, first sentence of the last paragraph, delete "section 16601 applies." and the first letter of the second sentence, creating one sentence that reads:
Here, the record indicates the restrictive covenant at issue was executed in connection with the sale of Sweet &Baker to HUB, which included the sale of all outstanding shares of Sweet &Baker and Freyermuth's and Weingart's acquisition of Hockey Parent shares.
2. On page 12, first full paragraph, delete the second sentence beginning "As discussed above," and replace it with the following sentence:
As discussed above, plaintiffs have failed to demonstrate enforcement of the forums election clause would implicate any unwaivable rights of plaintiffs, and Delaware applies a similar approach to section 16601 in evaluating the reasonableness of restrictive covenants.
There is no change in the judgment.
Appellants' petition for rehearing is denied.
MARGULIES, J.
The trial court dismissed plaintiffs Reed Freyermuth, Jr.'s, and Richard Weingart's claims against defendant Hockey Parent Holdings, L.P. (Hockey Parent) and stayed plaintiff ABD Insurance and Financial Services, Inc.'s (Newfront) claims against Hockey Parent based on an enforceable forum selection clause. Plaintiffs now challenge that order, alleging the forum selection clause was unenforceable due to a conflict with fundamental California rights and Labor Code section 925. Plaintiffs further assert Newfront's claims against Hockey Parent should not have been stayed because it is not a party to the agreement containing the forum selection clause. We disagree and affirm the order.
Newfront Insurance Services, LLC merged with ABD Insurance and Financial Services, Inc. and Aviation Marine Insurance Services. ABD Insurance and Financial Services, Inc. is the surviving company of the merger and operates under the name Newfront.
I.
BACKGROUND
A. Factual Background
In 2016, defendant HUB International Insurance Services, Inc. (HUB) acquired a competing insurance company, Sweet &Baker Insurance Brokers, Inc. (Sweet &Baker). Weingart and Freyermuth were employees at Sweet &Baker and two of five individuals who owned equity positions in the company. Following negotiations between the two companies, HUB agreed to purchase all outstanding shares in Sweet &Baker in exchange for $18,354,000, plus potential "True-up Payments." The purchase price consisted of a combination of cash and equity units in Hockey Parent, HUB's parent company. Weingart received $1,611,776.44 as part of the transaction, of which $450,450 was comprised of equity in Hockey Parent. Similarly, Freyermuth received $1,611,776.44 as part of the transaction, of which $351,120 was comprised of equity in Hockey Parent.
The "Stock Purchase and Contribution Agreement" (SPA) provided the sellers, which consisted of Sweet &Baker and the five individual shareholders (sellers), would deliver to HUB all stock certificates, various corporate documents related to Sweet &Baker, and certain documents related to the stock purchase transaction. The sellers also made certain warranties and representations in connection with the stock purchase transaction, including ownership of the shares at issue, financial performance, business operations, and efforts to preserve client and business relationships and Sweet &Baker's goodwill.
The SPA also imposed certain restrictive covenants on the sellers "to protect the value and goodwill of the Business and substantial investment made by [HUB]." These covenants included, in part, noncompetition, nonsolicitation and nonacceptance of clients, and nonsolicitation of business personnel clauses, and a confidentiality provision. The SPA acknowledged any breach of these provisions would result in "irreparable and ongoing damages," including "a significant loss of the value and goodwill of the Business purchased by [HUB] pursuant to this Agreement." The SPA acknowledged these covenants constituted "a material inducement" and an "integral part" of the transaction in light of "the highly competitive nature of the Business."
In addition to the SPA, Freyermuth and Weingart also executed "Subscription Agreement[s]" (Subscription Agreement) and "Equityholders Agreement[s]" (Equityholders Agreement) as part of the sale transaction. These agreements related to the receipt of shares of Hockey Parent as a component of Sweet &Baker's purchase price.
The Subscription Agreement governed Freyermuth's and Weingart's acquisition of Hockey Parent shares in consideration for the sale of the Sweet &Baker shares. HUB was not a party to this agreement, rather it was executed by Hockey Parent. The agreement provided that article VI of the Equityholders Agreement, discussed below, would apply to the acquired shares. It also contained a governing law provision, which stated in relevant part, "This Agreement shall be governed by and construed in accordance with the domestic substantive laws of the State of Delaware without giving effect to any choice or conflict of laws provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction," and waived any right to a jury trial "TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW."
The Equityholders Agreement governed in part the valuation and repurchase of Hockey Parent securities. The agreement was between Hockey Parent and various investors including, but not limited to, employees, officers, and directors of Hockey Parent and its subsidiaries. As to employee investors, the agreement allowed a terminated employee's shares in Hockey Parent to be repurchased for the" 'Call Price.'" The agreement then defined" 'Call Price'" as either the fair market value at the time of termination or, in the event the employee is terminated for "Cause" or engaged in "Misconduct," the "price equal to the lower of . . . the Fair Market Value . . . [or] the Cost of such Call Securities ...." "Cause" is then defined as (1) willful and serious misconduct in the course of employment; (2) a material breach of the terms of the employment; (3) a material breach of the restrictive covenants applicable to the employee; (4) fraud, theft, or serious dishonesty by the employee; or (5) an employee's admission or conviction of a misdemeanor involving moral turpitude or felony. Similarly, the agreement defines "Misconduct" as breach of the confidentiality, nonsolicitation, or noncompete provisions or the commencement of employment with a competitor within two years of the employee's termination if the termination is without cause or for "Good Reason."
We note the record only contains select pages from the Equityholders Agreement.
The scope of circumstances constituting "Good Reason" under the agreement are inapplicable to the parties' pending dispute.
The Equityholders Agreement also contains a governing law provision. That paragraph states in relevant part: "This Agreement and any claims arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule . . . that would cause the application of the law of any jurisdiction other than the State of Delaware. Each of the parties hereto submits to the exclusive jurisdiction of the Court of Chancery of the State of Delaware . . . in any action or proceeding arising out of or relating to this Agreement .... Each of the parties hereto waives any defense of inconvenient forum ...."
Following the acquisition, Freyermuth and Weingart became senior vice-presidents of HUB, and continued to service the former Sweet &Baker accounts and clients on behalf of HUB. At that time, they signed confidentiality and nondisclosure agreements (NDA). Both Freyermuth and Weingart subsequently resigned from HUB and began working as senior vicepresidents at Newfront.
B. Procedural Background
HUB filed arbitration demands against Freyermuth and Weingart, alleging breach of the SPA, breach of the NDA, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, and unfair competition. The demands assert Freyermuth's and Weingart's employment with Newfront violates the noncompetition and nonsolicitation, nonacceptance, and noninterference of clients provisions of the SPA. Specifically, the demands assert Freyermuth and Weingart are using HUB's confidential information and trade secrets to solicit business from HUB's customers.
In response, Newfront, Freyermuth, and Weingart filed the complaint herein against HUB and Hockey Parent, contesting their use of "unlawful post-employment restrictive covenants." They contend the terms of the SPA unlawfully prevent employees from joining competitors. The complaint further alleged the Equityholders Agreement likewise unlawfully restricts employees' ability to move to competitors due to the noncompete, customer nonsolicitation, and equity repurchase provisions. The complaint alleged unfair competition and sought declaratory relief regarding the validity of the restrictive covenants, equity-related agreements, and NDAs.
Plaintiffs moved to stay HUB's arbitration and asserted a stay was appropriate because (1) of a risk of conflicting rulings, and (2) the claims are not subject to arbitration. Conversely, HUB sought to compel arbitration of plaintiffs' complaint. HUB argued the SPA's arbitration provision applied to all of plaintiffs' claims, and Newfront should be compelled to arbitration because its claims "are derivative of the Individual Plaintiffs' claims and predicated upon the exact same issues."
Separately, Hockey Parent-who was not a signatory to the SPA- sought to dismiss plaintiffs' complaint and enforce the Delaware forum selection clause in its Equityholders Agreement with Freyermuth and Weingart. Hockey Parent asserted the forum selection clause was valid and enforceable, and encompassed Freyermuth's and Weingart's claims. In response, plaintiffs jointly argued the forum selection clause violated California's public policy, and Newfront asserted it was not bound by the forum selection clause as a nonsignatory.
The trial court denied plaintiffs' motion to stay. It concluded the SPA's arbitration provision applied to plaintiffs' claims, was not inconsistent, and delegated the issue of arbitrability to the arbitrator. The court also granted in part HUB's motion to compel. It concluded the arbitration provision covered Freyermuth's and Weingart's claims, and the arbitrator has authority to determine jurisdiction, arbitrability, and enforceability issues. Finally, the court agreed with plaintiffs that Newfront was not subject to arbitration, but stayed its claims pending completion of the arbitration.
The trial court also granted Hockey Parent's motion to dismiss. The court concluded the Equityholders Agreement contained a mandatory forum selection clause, and Freyermuth and Weingart voluntarily accepted that clause and were bound by it. The court also stayed Newfront's claims against Hockey Parent.
Plaintiffs timely appealed the order granting the motion to dismiss and staying Newfront's claims against Hockey Parent.
II. DISCUSSION
On appeal, plaintiffs contest the enforceability of the forum selection clause. They assert the public policy exception applies, and the forum selection clause is prohibited by Labor Code section 925. They further contend the trial court erred in staying Newfront's claims because they raise unique claims against Hockey Parent separate from those related to the Equityholders Agreement.
A. Applicable Legal Principles
In California, contractual forum selection clauses are enforceable, provided they are entered into freely and voluntarily, and their enforcement is not unreasonable. (Smith, Valentino &Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 495-496; America Online, Inc. v. Superior Court (2001) 90 Cal.App.4th 1, 11.) A contractual forum selection clause is presumed valid, and the burden is on the party seeking to overturn the forum selection clause to show that the clause is unreasonable. (Schlessinger v. Holland America (2004) 120 Cal.App.4th 552, 558-559.) A forum selection clause is unreasonable if the forum selected would be "unavailable or unable to accomplish substantial justice." (Smith, Valentino, at p. 494; Cal-State Business Products &Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1679.) A trial court's decision to enforce a forum selection clause is reviewed for abuse of discretion. (Verdugo v. Alliantgoup, L.P. (2015) 237 Cal.App.4th 141, 148 (Verdugo).)
Courts have distinguished between mandatory and permissive forum selection clauses for the purpose of analyzing whether a clause should be enforced. "A mandatory clause will ordinarily be given effect without any analysis of convenience; the only question is whether enforcement of the clause would be unreasonable. On the other hand, when the clause merely provides for submission to jurisdiction and does not expressly mandate litigation exclusively in a particular forum, then the traditional forum non conveniens analysis applies." (Intershop Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 196 (Intershop).)
B. Hockey Parent's Forum Selection Clause
The parties do not dispute the forum selection clause at issue is mandatory. However, plaintiffs argue the court erred in enforcing the clause because doing so would impair their rights under Business and Professions Code section 16600, which reflects unwaivable California public policies and protections for California-based employees. They further assert Labor Code section 925 prohibits the forum selection clause at issue. We disagree.
All statutory references are to the Business and Professions Code unless otherwise noted.
1. Impairment of Rights
Plaintiffs contend enforcement of the forum selection clause would interfere with California public policies protecting employee mobility and fair competition under section 16600, as well as the right to a jury trial. We address each argument below.
As noted above, the party opposing enforcement of a mandatory forum selection clause ordinarily bears the burden to show it should not be enforced; however, "when the claims at issue are based on unwaivable rights created by California statutes," the burden is reversed, and the party seeking to enforce the clause must show that litigating the claims in the contractually chosen forum" 'will not diminish in any way the substantive rights afforded . . . under California law.'" (Verdugo, supra, 237 Cal.App.4th at p. 147.) California appellate courts have shifted the burden in this manner where the claims at issue were based on the plaintiff's statutory rights, the governing statutory schemes provided strong remedies to encourage enforcement of those rights, and the Legislature had declared the rights unwaivable through express anti-waiver provisions. (See Verdugo, at pp. 150, 156.) In these circumstances, enforcement of a forum selection clause-particularly when accompanied by a choice of law provision requiring application of the laws of the designated forum rather than California law-would operate as a prohibited waiver of the California statutory rights at issue. (Id. at pp. 155157.)
We disagree with plaintiffs that merely referencing section 16600 in their complaint is sufficient to shift the burden onto Hockey Parent. Rather, plaintiffs must demonstrate their claims arise from such rights. (See Verdugo, supra, 237 Cal.App.4th at p. 147.)
We conclude plaintiffs' reliance on section 16600 to argue against enforcement of the forum selection clause must fail. "In California, contractual provisions that prevent a person from engaging in a profession, trade or business are generally void. [Citation.] As the Supreme Court has noted, 'section 16600 evinces a settled legislative policy in favor of open competition and employee mobility.'" (Blue Mountain Enterprises, LLC. v. Owen (2022) 74 Cal.App.5th 537, 550 (Blue Mountain).) However, section 16601 contains an exception to this general rule: "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 . . . 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 . . . carries on a like business therein." (§ 16601, 1st par.)
" 'Section 16601's exception serves an important commercial purpose by protecting the value of the business acquired by the buyer. "In the case of the sale of the goodwill of a business it is 'unfair' for the seller to engage in competition which diminishes the value of the asset he sold." [Citation.] Thus, "[t]he thrust of . . . section 16601 is to permit the purchaser of a business to protect himself[, herself,] or itself against competition from the seller which competition would have the effect of reducing the value of the property right that was acquired." [Citation.] "One of the primary goals of section 16601 is to protect the buyer's interest in preserving the goodwill of the acquired corporation."' [Citation.] The exception is limited: '[I]n order to uphold a covenant not to compete pursuant to section 16601, the contract for sale of the corporate shares may not circumvent California's deeply rooted public policy favoring open competition. The transaction must clearly establish that it falls within this limited exception.'" (Blue Mountain, supra, 74 Cal.App.5th at pp. 550-551.)
Here, the record indicates section 16601 applies. The restrictive covenant at issue was executed in connection with the sale of Sweet &Baker to HUB, which included the sale of all outstanding shares of Sweet &Baker and Freyermuth's and Weingart's acquisition of Hockey Parent shares. As part of that transaction, the SPA expressly stated the purpose of the restrictive covenants was "to protect the value and goodwill of the Business and substantial investment made by [HUB]." The SPA further explained these covenants constituted "a material inducement" and an "integral part" of the transaction in light of "the highly competitive nature of the Business," and their breach would result in "a significant loss of the value and goodwill of the Business purchased by [HUB] pursuant to this Agreement." (See Blue Mountain, supra, 74 Cal.App.5th at p. 550 ["' "One of the primary goals of section 16601 is to protect the buyer's interest in preserving the goodwill of the acquired corporation."' "].)
Based on the foregoing, plaintiffs have not established their claim against Hockey Parent is based on unwaivable statutory rights or provides a basis for shifting to Hockey Parent the burden as to the enforceability of the forum selection clause. In the absence of a statute prohibiting the parties from choosing Delaware as a forum and thus potentially waiving the application of California law, "there exist 'no compelling policy reasons for denying enforcement of the forum selection clause ....'" (CQL Original Products, Inc. v. National Hockey League Players' Assn. (1995) 39 Cal.App.4th 1347, 1357.)
Nor did the court err in concluding plaintiffs failed to demonstrate the clause is unreasonable and should not be enforced. The record indicates the clause was a material component of the transaction and viewed as a crucial element for maintaining the value of the purchased business. And section 16601 recognizes and accepts limits on employee mobility as a component of the sale of business. While plaintiffs argue a conflict exists between Delaware law and California's public policy favoring free and open competition, under section 16601 both states apply a similar approach to evaluating such covenants. To be enforceable under Delaware law, a covenant not to compete must, among other things, "be reasonable in scope and duration, both geographically and temporally," and "advance a legitimate economic interest of the party enforcing the covenant." (All Pro Maids, Inc. v. Layton (Del. Ch. Aug. 9, 2004) 2004 WL 1878784, at p. *5, affd. Layton v. All Pro Maids, Inc. (Del. 2005) 880 A.2d 1047.) Similarly, California requires a covenant be" 'necessary in terms of time, activity and territory to protect the buyer's interest.'" (Vacco Industries, Inc. v. Van Den Berg (1992) 5 Cal.App.4th 34, 48.) While Delaware's and California's evaluations of these factors may not be identical, plaintiffs have not demonstrated that such differences alone justify rejecting the parties' mandatory forum selection clause.
Finally, we note plaintiffs' challenge to the scope of the covenant is a matter for the Delaware courts. As discussed above, enforcement of the forum selection clause does not implicate any unwaivable rights of plaintiffs, and Delaware applies a similar approach to section 16601 in evaluating the reasonableness of restrictive covenants. Accordingly, the trial court did not err in concluding section 16600 is not applicable to invalidate the parties' forum selection clause.
b. Jury waiver
Plaintiffs next contend enforcement of the forum selection clause impairs their unwaivable right to a jury trial. In response, Hockey Parent notes plaintiffs assert equitable declaratory relief claims, which are not triable to a jury. " 'As a general proposition, "[The] jury trial is a matter of right in a civil action at law, but not in equity." '" (Caira v. Offner (2005) 126 Cal.App.4th 12, 23.) And "a true action for declaratory relief is equitable." (Id. at p. 24.) However, "in determining the right to a jury, it is 'not . . . the form of the action but rather . . . the nature of the rights involved and the facts of the particular case,' that determine whether an action is legal or equitable." (Id. at p. 27.)" 'Where an action for declaratory relief is in effect used as a substitute for an action at law for breach of contract, a party is entitled to a jury trial as a matter of right.' [Citation.] That is because 'a suit to recover damages for . . . breach of contract is an action at law in which a right to jury trial ordinarily exists.'" (Id. at pp. 25-26, italics added by Caira.) Conversely," 'questions relating to the formation of a contract, its validity, its construction and effect, excuses for nonperformance, and termination are proper subjects for declaratory relief.'" (Id. at p. 24; see also Wolf v. Walt Disney Pictures &Television (2008) 162 Cal.App.4th 1107, 1126 ["When there is no material conflict in the extrinsic evidence, the trial court interprets the contract as a matter of law."].)
Here, plaintiffs have exclusively sought declaratory relief that the restrictive covenants at issue are unenforceable and illegal under section 16600. They argued to the trial court in their motion to stay arbitration that their claims are equitable in nature, and the complaint does not request a jury trial. And the parties have not raised any factual disputes regarding the Equityholders Agreement. Rather, the parties' dispute is purely one of contract interpretation-e.g., whether the restrictive covenants contained therein are legal and enforceable.
In response, plaintiffs argue the underlying issues involve statutory employment rights, which arise in law, not equity. However, plaintiffs do not have an employment relationship with Hockey Parent, and their claims against it relate solely to the proper valuation of their Hockey Parent shares and the validity of the corresponding contract terms. Such claims have regularly been deemed equitable and appropriate for declaratory relief actions. (See, e.g., George F. Hillenbrand, Inc. v. Insurance Co. of North America (2002) 104 Cal.App.4th 784, 802 ["a declaratory relief action is the appropriate vehicle for resolving disputes involving the contested meaning of contractual language"]; Fowler v. Ross (1983) 142 Cal.App.3d 472, 478, fn. omitted ["the plaintiffs here sought only a declaration of their rights and duties under the contract.... The gist of this action being equitable in nature, there exists no right to a jury trial."].)
Plaintiffs also assert they may amend the complaint in the future to add claims that are legal in nature and subject to a jury trial. Plaintiffs do not specify what those claims may be and how they would entitle plaintiffs to a jury trial. In light of the ambiguity around plaintiffs' argument, we question whether "tacking on" a legal claim to their declaratory action would necessarily alter the nature of the rights involved and give rise to a jury trial. (See Caira v. Offner, supra, 126 Cal.App.4th at p. 27.) And such speculation is insufficient to demonstrate the trial court erred in enforcing the parties' forum selection clause.
c. Rational basis for Delaware forum
A forum selection clause is reasonable if it has "a logical connection with at least one of the parties or their transaction." (Verdugo, supra, 237 Cal.App.4th at p. 147.) The Delaware forum selection clause in the Equityholders Agreement meets this standard, and plaintiffs have made no showing to the contrary. Hockey Parent is a Delaware limited partnership. The Equityholders Agreement governs all outstanding equities in Hockey Parent, which may be held by various categories of investors in multiple geographic regions. As such, it is reasonable for Hockey Parent to seek to litigate any claims involving its equities in a single locale. This evidence establishes a reasonable basis for the choice of Delaware as a forum. (Accord, Intershop, supra, 104 Cal.App.4th at p. 200 ["enforcement of the forum selection clause makes sense under the circumstances here, where the options are for stock in a German corporation subject to German securities regulations and where the parties agreed that German law would apply"].)
Labor Code section 925 prohibits an employer from "requir[ing] an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would . . . [¶] (1) Require the employee to adjudicate outside of California a claim arising in California. [¶] (2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California." (Lab. Code, § 925, subd. (a).) Any contract in violation of this prohibition "is voidable." (Id., § 925, subd. (b).) However, Labor Code section 925 "shall not apply to a contract with an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied." (Id., § 925, subd. (e).)
Plaintiffs assert the forum selection clause is unenforceable because it is contrary to Labor Code section 925, and the attorney representing Sweet &Baker did not represent Freyermuth or Weingart individually. Plaintiffs contend they were required to accept the SPA, the Subscription Agreement, and the Equityholders Agreement together if they wished to accept employment with HUB.
We need not resolve the parties' dispute regarding whether plaintiffs were independently represented by counsel because we conclude the Equityholders Agreement and its forum selection clause was not a condition of employment. On this issue, we find Grove v. Juul Labs, Inc. (2022) 77 Cal.App.5th 1081 (Grove) instructive. There, the plaintiff was a former employee of Juul Labs, Inc. (Juul) who received options to acquire shares pursuant to a standard stock option agreement during the course of his employment. (Id. at p. 1084.) After exercising his options to acquire stock, the plaintiff sought to inspect the company's books and records. (Ibid.) Juul moved to stay the California action and enforce a forum selection clause. (Id. at p. 1086.) The plaintiff argued Labor Code section 925 voided the forum selection clause because he was required to accept the clause as a condition of his employment. (Grove, at p. 1089.) The trial court concluded in relevant part that Labor Code section 925 did not apply to the plaintiff's claims because he "alleged them in his capacity as a shareholder, not an employee." (Grove, at p. 1089.)
On appeal, the plaintiff argued in relevant part that requiring him to litigate his claims in Delaware contravenes the public policy underlying Labor Code section 925. (Grove, supra, 77 Cal.App.5th at p. 1093.) The court disagreed, noting "this public policy exception fails at the outset because [the plaintiff] has not shown that his class and derivative claims are based on a right created by California statute." (Id. at pp. 1093-1094.) Specifically, the court explained, "[The plaintiff] does not allege any claim against Juul in his capacity as an employee or former employee. All of [the plaintiff's] claims are alleged in his capacity as a shareholder .... Moreover, the forum selection clause on which the trial court relied is not part of an employment contract. It is contained in Juul's corporate charter, which is a contractual agreement between the corporation and its shareholders." (Id. at p. 1094.)
Our colleagues in Division Three also rejected the plaintiff's argument "that he can invoke [Labor Code] section 925 because there is an 'interconnection between [his] claims and his employment-related contracts,' in that he received his stock options as part of his compensation." (Grove, supra, 77 Cal.App.5th at p. 1094.) The court explained, "We see nothing in [Labor Code] section 925 that prevents an employer from including in its compensation package an option for employees to purchase shares in a foreign corporation. Nor do we construe the statute to require a corporation chartered in Delaware to conduct its internal affairs according to California law simply because employees in California have purchased shares." (Ibid.) The court distinguished other cases in which Labor Code section 925 applied, noting "the present case is a shareholder dispute, not an employment dispute, and the forum selection clause that the trial court relied upon is contained in the corporate charter, not in an employment-related contract." (Grove, at p. 1095.)
While the present matter does not involve a forum selection clause in a corporate charter, we find the reasoning applicable. Here, as in Grove, the plaintiffs attempt to apply Labor Code section 925 to void a forum selection clause contained in a nonemployment contract-i.e., the Equityholders Agreement. The Equityholders Agreement, which is between Hockey Parent and its investors, including but not limited to Freyermuth and Weingart, is not an employment contract but rather governs the valuation of its shares." 'Investor'" is defined to include both "Employee Investors" and other investors. More generally, plaintiffs signed the Equityholders Agreement as part of the sale of Sweet &Baker to HUB, and not their subsequent employment with HUB. The Equityholders Agreement did not govern the terms of Freyermuth's and Weingart's employment with HUB, and Hockey Parent was never their employer. The acquisition of stock in Hockey Parent was in exchange for their shares in Sweet &Baker. It was not a term or condition of employment: some HUB employees do not own stock, and not all stockholders are HUB employees. We thus find the Equityholders Agreement, which is applicable to all corporate stockholders, analogous to the general applicability of the corporate charter in Grove. And we conclude, as did the Grove court, that Labor Code section 925 is inapplicable and does not void the mandatory forum selection clause.
Because we conclude the Equityholders Agreement was not a condition of employment, we need not address whether plaintiffs were individually represented by counsel.
C. Stay of Newfront's Claims Against Hockey Parent
Finally, plaintiffs contend Newfront was not party to any agreement containing a forum selection clause, its claims were properly brought in California, and no basis thus exists for staying its claims against Hockey Parent.
Code of Civil Procedure section 410.30, subdivision (a) provides, "When a court upon motion of a party or its own motion finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just." "The trial court is vested with broad discretion to apply the doctrine [citation], and this discretion 'widens when it imposes a stay rather than a dismissal.' [Citation.] '[I]n considering a stay the trial court can take into account any consideration which bears on the relative suitability or convenience of the two forums.' [Citation.] [¶] A stay under the forum non conveniens doctrine effectuates the trial court's' "inherent power, in its discretion, to stay proceedings when such a stay will accommodate the ends of justice." [Citation.] As the court in Landis v. North American Co. (1936) 299 U.S. 248, 254, explained, "the power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." '" (St. Paul Fire &Marine Ins. Co. v. AmerisourceBergen Corp. (2022) 80 Cal.App.5th 1, 13-14.)
Plaintiffs have not shown that the court lacked the inherent power to order the stay or that it abused its discretion in doing so. In considering Newfront's claims, the trial court noted there was "significant overlap" with Freyermuth's and Weingart's claims against Hockey Parent. It explained: "This is about the intersection between [section] 16600 and the law that says that you can have certain restrictions in connection with the sale of a business ....It's an area that's fraught with a lot of dispute. I don't see any reason to be resolving those disputes twice." The record supports the court's conclusion. The allegations in the complaint indicate significant overlap between Freyermuth's and Weingart's claims regarding the validity of the restrictive covenants and Newfront's unfair competition and declaratory relief claims. Specifically, Newfront's unfair competition claim asserts (1) the postemployment restrictive covenants "unlawfully restrains HUB employees from accepting employment elsewhere," and (2) that any agreements penalizing employees subject to postemployment restrictive covenants "are unlawful." Similarly, the declaratory relief sought by Newfront asserts these "post-employment restrictive covenants with Weingart, Freyermuth, and, upon information and belief, other HUB employees and former employees, unlawfully restrain them from pursuing lawful employment with Newfront." Newfront requested in part a judicial determination that the restrictive covenants "be found unlawful."
Accordingly, the record shows the trial court had a reasonable basis to conclude that a stay would promote judicial efficiency. As noted by the trial court, Delaware is the proper forum for adjudicating the validity of the restrictive covenants in the Equityholders Agreement. It was not an abuse of discretion for the trial court to decline to duplicate that effort and stay the matter in light of the likely impact of any Delaware judgment on Newfront's pending claims.
While Newfront claims it will be subject to an "indefinite stay," it could seek relief from the stay as appropriate based on future developments in Freyermuth's and Weingart's litigation against Hockey Parent.
III. DISPOSITION
The order is affirmed. Respondents may recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)
WE CONCUR: HUMES, P. J. BOWEN, J.[*]
[+] Judge of the Contra Costa County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.