Application Group, Inc. v. Hunter Group, Inc

In Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal. App. 4th 881, AGI (a California corporation) hired Dianne Pike (a non-resident consultant) away from Hunter (a Maryland corporation with branch offices in several states, including California). While working for Hunter, Pike had signed an employment agreement that included a covenant not to compete and a Maryland choice-of-law clause. (Id. at pp. 885-888.) In 1992 or 1993, Hunter sued Pike and AGI in Maryland, alleging that Pike had breached her covenant not to compete and that AGI had unlawfully interfered with Hunter's contract with Pike. That case was tried in 1994 and resulted in a judgment in favor of Pike and AGI (because Hunter failed to present any evidence of damages). Meanwhile, in April 1993, AGI and Pike had sued Hunter for declaratory relief in California, alleging that the covenant not to compete was unenforceable. On Hunter's motion, the California action had been stayed pending completion of the Maryland suit; the stay was lifted after judgment was entered by the Maryland court. (Id. at pp. 887-888.) On appeal, Hunter conceded that California law invalidated its covenant not to compete as to California residents but claimed that, under Maryland law, the covenant was enforceable against nonresident consultants hired for employment in California -- and that Maryland law ought to be applied to Pike. (Id. at p. 895.) In Application Group, Inc. v. Hunter Group, Inc., "each state purports to have significant interests in having its law applied." (Id. at p. 900.) The questions there were (1) whether Maryland's law is contrary to a fundamental policy of California and, if so, (2) which state has a materially greater interest in the determination of the issue and (3) which state's interests would be more seriously impaired if its policy were subordinated to the policy of the other state. (Ibid.)