(CN) – A San Mateo man attempting to void a non-compete agreement with a former employer improperly filed a lawsuit in California, where such agreements are disfavored under the law, and must pursue his claim where the employer is based, a federal judge ruled.
Philip Harstein, a resident of San Mateo, Calif. worked as Rembrandt IP Solutions’ managing director of business development. Rembrandt is based in Pennsylvania.
In a complaint filed in San Francisco, Harstein said that during the 26 months he worked with Rembrandt before leaving to become vice president of a competitor, he generated more than 100 patent investment leads for the company, with a potential profit of millions of dollars.
But Harstein’s employment contract with Rembrandt included a non-compete clause that restricted him from working for its competitor for one year after he left the company — unless he got the written consent of its CEO or president.
The deal also barred Harstein from disclosing Rembrandt’s trade secrets to third parties.
On the day he resigned, Harstein asked Rembrandt to waive the non-compete clause.
When the company refused, he sued in San Mateo County Superior Court seeking a declaration that the non-compete clause in his contract is invalid under California law.
Rembrandt removed the case to federal court on diversity grounds on May 4. Harstein countered by filing a motion to remand, arguing that Rembrandt had failed to establish the amount in controversy exceeded the federal court’s $75,000 jurisdictional minimum. Harstein also argued that because he does not intend to steal Rembrandt’s trade secrets the value of the non-compete deal to Rembrandt is zero.
But in a ruling he issued on Monday U.S. District Judge Samuel Conti denied Harstein’s motion to remand, finding that the possibility he would share Rembrandt’s trade secrets with his new, competing employer “is very real,” and if he shared Rembrandt’s investment leads it stands to lose millions, clearly in excess of the court’s $75,000 jurisdictional limits.
Finding his court had jurisdiction cleared the way for Conti to address Rembrandt’s motion to dismiss for improper venue Harstein’s claims.
Harstein’s employment agreement with Rembrandt specified that all actions related to the agreement be litigated in a Pennsylvania court.
Harstein argued that because California has a strong public policy against non-compete covenants his case would succeed in California, but since Pennsylvania courts usually uphold such covenants he would lose if it was transferred to that state.
But Conti rejected Harstein’s reasoning and granted Rembrandt’s motion to dismiss.
“The problem with plaintiff’s argument is that it does not challenge the reasonableness of the forum selection clause itself, only the reasonableness of its effect,” Conti wrote.