California v. New York: Which State is Better for Your Client’s Objectives?

By Patrick J. Somers

Having recently moved from New York to California and joined Kendall Brill & Kelly LLP, I’m often asked to compare both places. There are pluses and minuses to each, but I’ve quickly figured out that many people have strong opinions about which is “better.” The differences between New York and California also extend to the practice of law. But considerations about which place you prefer are not the same as considerations about which law and which forum are better for a particular objective.

For instance, when parties to a contract have the option to choose between New York law and California law, or to choose which forum should hear any possible dispute, there are a number of differences between New York and California that they should keep in mind, none of which has to do with whether they prefer New York pizza or California weather. Based on my experience, here are some examples that immediately jump out:

  1. Anti-SLAPP laws

California’s anti-SLAPP law has real teeth; New York’s does not.  SLAPP suits (Strategic Lawsuits against Public Participation) are brought by plaintiffs who wish to intimidate and silence others by forcing the speaker to defend their speech in litigation. In an effort to prevent any type of chilling effect on speech, a number of states have passed anti-SLAPP laws. These laws can provide litigants with a powerful procedural device in defending against lawsuits related to protected petitioning or speech activity. But the power and level of protection provided by anti-SLAPP laws varies widely by jurisdiction, including California and New York.

California. California’s anti-SLAPP statute provides lawyers with a powerful weapon to use in civil litigation. Under California law, parties can move to strike a complaint by demonstrating that they are being sued for “any act . . . in furtherance of the [movant’s] right of petition or free speech under the United States Constitution or California Constitution in connection with a public issue.”[1]

California courts have found that many different types of disputed statements and conduct relate to an issue of public interest and thus are protected. For example, KBK attorneys appealed and won dismissal of a lawsuit under the anti-SLAPP statute related to defamation and trade libel claims filed by a company over statements made in a press release.

If the anti-SLAPP statute applies, there are a number of advantage that California’s procedure provides. First, by filing an anti-SLAPP motion, a stay of all discovery is placed on the litigation until there is a ruling on the motion.[2] A party may seek to have the stay lifted by showing good cause. Second, application of the anti-SLAPP law turns the table on the non-moving party and forces it to establish a probability of success on its claims from the outset of the case so long as the movant establishes that a cause of action arises from a protected activity. Finally, if the court grants the motion to strike, it will impose costs and attorney’s fees on the other side.[3]

New York. New York’s law is limited to instances in which the lawsuit involves a “public petition” or “participation” about some type of government license to operate or to proceed with a project (e.g., a zoning permit).[4] The law thus only protects parties who are sued because they reported, commented, ruled upon, challenged, or opposed a “permit, zoning change, lease, license, certificate or other entitlement for use or permission to act from any government body, or any person with an interest, connection or affiliation with such person that is materially related to such application or permission.”[5]

New York’s law also does not provide the same types of benefits as California’s. It does not stay discovery, nor does it mandate an award of attorney’s fees and costs. Instead, a successful moving party may, at the court’s discretion, recover damages, including costs and attorney’s fees, provided that there is a demonstration that the lawsuit was “commenced or continued without a substantial basis in fact and law and could not be supported by a substantial argument for the extension, modification or reversal of existing law.”[6]

  1. Enforceability of Post-employment Non-Competition Agreements

California and New York take starkly different views about the enforceability of post-employment non-competition agreements. Under California law, post-employment non-competes generally are prohibited by statute, subject to a few limited exceptions.[7] New York, in contrast, permits the enforceability of such agreements so long as the restrictions are reasonably limited in their scope (time and place), necessary to protect the employer’s legitimate business interest, not harmful to the general public, and not unreasonably burdensome to the employee.[8]

  1. Jury Waiver Provisions

Under New York law, pre-dispute jury waiver provisions are enforceable. Under California law, pre-dispute jury waiver provisions are unenforceable in a California state court action. The California Constitution “treats the historical right to a jury resolution of disputes that have been brought to a judicial forum as fundamental, providing that in ‘a civil cause,’ any waiver of the inviolate right to a jury determination must occur by the consent of the parties to the cause as provided by statute.”[9] Because the relevant statute, Section 631 of the California Civil Procedure Code, applies only once an action is pending,[10] “governing California constitutional and statutory provisions do not permit pre-dispute jury waivers.”[11]

This same rule also applies in federal courts, sitting in diversity, within the Ninth Circuit.[12] And at least one state appellate court in California has extended this rule even further by refusing to enforce a jury waiver provision contained in an agreement expressly governed by New York law (which, as noted above, permits pre-dispute jury waiver provisions) solely because the dispute was being litigated in California.[13]

The use of pre-dispute jury waivers in California, however, is not impossible. A pre-dispute jury waiver likely is enforceable under California law when: (1) the parties agree to a “judicial reference” pursuant to Section 638 California Code of Civil Procedure; (2) the parties agree to arbitrate; or (3) the parties agree to “binding mediation.”[14]

  1. Evidence

California has an evidence code; New York does not. New York is one of only a handful of states that has not codified its law of evidence. And while the absence of codified rules might not impact the substance of an agreement, in deciding between a New York forum and a California forum for potential future litigation, it is worthwhile to keep in mind that not having a codified set of rules has consequences. Codification makes the rules easily accessible and permits uniform application of the law. Lawyers can easily argue based on the rules and have a firmer grasp of what type of evidence will and will not be admitted.

The absence of a codified set of rules creates potential uncertainty in, and inconsistent application of, the law. As the New York Guide to Evidence aptly explains, “It bears emphasis that . . . the law of evidence is continuously subject to change.”[15] So, for example, if an evidence question comes up during trial, counsel and the court in California can easily turn to the written rules for direction, but not so in New York. In New York, lawyers, often relying on the format of the Federal Rules of Evidence, must search the common law to find the New York equivalent, which does not always exist. Absent finding a basis in the common law, lawyers might resort to arguments based on fairness and prejudice to convince a judge, on the spot, whether the evidence should be admitted.

The examples above illustrate an important point: choosing a jurisdiction’s forum or law involves much more than simply picking the place you like best. Based on a party’s circumstances and objectives, the differences between California and New York law and practice may produce different outcomes. So, before settling on which law should govern and where a lawsuit should be heard, you should always keep in mind that these two jurisdictions have a variety of differences and make a determination about which set of rules—or lack thereof—best suits your objectives.

[1] Cal. Civ. Proc. Code § 425.16.

[2] Cal. Civ. Proc. Code § 425.16(g). In addition, even if the initial anti-SLAPP motion is unsuccessful, the unsuccessful movant may immediately appeal the decision and the appeal automatically stays all further trial proceedings on causes of action affected by the motion. Varian Med. Sys., Inc. v. Delfino, 35 Cal. 4th 180, 191-92 (2005).

[3] Note, however, that the statute makes an award of fees to a non-moving party mandatory if the court finds that an anti-SLAPP motion was “frivolous or … solely intended to cause unnecessary delay.”  Cal. Civ. Proc. Code § 425.16(c)(2).

[4] See N.Y. Civ. Rights Law § 70-a. An action involving public petition or participation is defined as “an action, claim, cross claim or counterclaim for damages that is brought by a public applicant or permittee, and is materially related to any efforts of the defendant to report on, comment on, rule on, challenge or oppose such application or permission.” N.Y. Civ. Rights Law § 76-a(1)(a). A “public applicant” or “permittee” is defined as “any person who has applied for or obtained a permit, zoning change, lease, license, certificate or other entitlement for use or permission to act from any government body, or any person with an interest, connection or affiliation with such person that is materially related to such application or permission.” N.Y. Civ. Rights Law § 76-a(1)(b).

[5] N.Y. Civ. Rights Law § 76-a.

[6] N.Y. Civ. Rights Law § 70-a(a); see also id. §70-a(b)-(c) (addressing compensatory and punitive damages).

[7] Section 16600 of the California Business and Profession Code 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.” The exceptions, found in Sections 16601, 16602, and 16602.5, permit the use of a non-compete provision where the agreement relates to the sale of the goodwill of a business or the dissolution of a partnership or LLC.

[8] E.g., BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 388-89 (1999).

[9] Grafton Partners L.P. v. Superior Court, 36 Cal. 4th 944, 951 (2005).

[10] Section 631(f) identifies six circumstances in which a jury waiver is permissible, all of which apply only once there is a pending action before a court. Cal. Civ. Proc. Code § 631(f) (providing that a right to jury “may only be waived” by: (1) failing to appear at trial; (2) written consent filed with the clerk or the court; (3) oral consent, in open court, entered in the minutes; (4) failing to demand jury trial within a specified period after the case is set for trial; or (5) failing to pay the required fees in advance or (6) during trial).

[11] Grafton Partners, 36 Cal. 4th at 967.

[12] In re County of Orange, 784 F.3d 520, 524 (9th Cir. 2015) (“Erie’s federalism principle requires federal courts sitting in diversity to import, as the federal rule, state law governing jury trial waivers where, as here, state law is even more protective than federal law of the jury trial right.  Applying California law, we hold that the parties’ contractual jury trial waiver is unenforceable.”). Notably, the vast majority of U.S. Courts of Appeals have held that federal courts sitting in diversity apply federal law (not state law) to determine the enforceability of a jury waiver provision.  Id. at 529 (collecting cases from the First, Second, Third, Fourth, Sixth, and Tenth Circuits). The Ninth Circuit distinguished its decision from those cases by reasoning that, unlike the state law at issue in those cases, California law “is more protective than federal law of the right to trial by jury,” id., and therefore “no federal rule . . . governs the validity of a pre-dispute jury trial waiver when state law is more protective than federal law of the jury trial right,” id. at 531.

[13] Rincon EV Realty LLC v. CP III Rincon Towers, Inc., 8 Cal. App. 5th 1, 15 (Cal. Ct. App. 2017) (“California, as the forum state, has a materially greater interest than New York in determining the enforceability of the jury waivers at issue here, and under California law, the waivers are not enforceable.”).

[14] Grafton Partners L.P., 36 Cal. 4th at 960-61; Bowers v. Raymond J. Lucia Cos., 206 Cal. App. 4th 724, 736-37 (2012).

[15] Guide to N.Y. Evid. rule 1.01, Purpose and Construction (emphasis added).

2017-12-06T01:31:08+00:00