No.

SI47190

IN THE SUPREME COURT

OF THE STATE OF CALIFORNIA

RAYMOND EDWARDS II,

Plaintiff and Appellant,

vs.

ARTHUR ANDERSEN, LLP,

Defendant and Respondent.

After a Decision by the Court of Appeal

Second Appellate District, Division Three, Case No. B 178246
Los Angeles Superior Court Case No. BC 294853
Andria K. Richey, Judge Presiding

ANSWER TO THE AMICUS BRIEF

OF THE EMPLOYERS GROUP

LAW OFFICES OF RICHARD A. LOVE

Richard A. Love, SBN 61944
Beth A. Shenfeld, SBN 116223
1160 I Wilshire Boulevard, Suite 2000
Los Angeles, California 90025-1756
(310) 477-2070 I Facsimile (310) 477-3922

GREINES, MARTIN, STEIN & RICHLAND LLP

Marc J. Poster, SBN 48493
Robin Meadow, SBN 51126
5700 Wilshire Boulevard, Suite 375
Los Angeles, California 90036-3626
(310) 859-7811 I Facsimile (310) 276-5261

Attorneys for Plaintiff and Appellant

RAYMOND EDWARDS II
 TABLE OF CONTENTS

Page

INTRODUCTION I

LEGAL DISCUSSION I

1. ANDERSON COULD NOT LAWFULLY REQUIRE

PLAINTIFF TO GENERALLY RELEASE "ANY AND ALL
CLAIMS" AS A CONDITION OF FUTURE
EMPLOYMENT BECAUSE LABOR CODE SECTION
2804 SPECIFICALLY PROHIBITS WAIVER OF AN
EMPLOYEE'S CLAIM FOR REIMBURSEMENT OF
EMPLOYMENT-RELATED EXPENSES. I

II. ANDERSEN'S RELEASE WRONGFULLY PURPORTED

TO WAIVE PLAINTIFF'S FUTURE CLAIMS FOR
INDEMNITY UNDER LABOR CODE SECTION 2802. 5

CONCLUSION 7

CERTIFICATE OF COMPLIANCE 8
 TABLE OF AUTHORITIES

Cases Page

Douglas v. Los Angeles Herald-Examiner

(1975) 50 Cal.App.3d 449 6

Reeves v. Hanlon
(2004) 33 Cal.4th 1140 4

Rooz v. Kimmel
(1997) 55 Cal.AppAth 573 6

Safeco Ins. Co. of America v. Robert S.

(2001) 26 Cal.4th 758 5

Statutes

Labor Code section 2802 1,3,5-6

Labor Code section 2804 1,3,5-6

II
 INTRODUCTION

Contrary to the frantic concerns expressed in the Employers Group

("Group")! amicus brief, the sky is not falling. Plaintiff Raymond
Edwards II is not asking this Court to void all existing general releases
between employers and employees. The Court of Appeal did not do so, and
this Court does not have to, either. Plaintiff only asks this Court to hold
that an employer cannot lawfully require an employee to release future
claims to indemnification for employment-related expenses under labor
Code section 2802 as a condition of future employment.
We briefly explain each of these points.

LEGAL DISCUSSION

I. ANDERSON COULD NOT LAWFULLY REQUIRE

PLAINTIFF TO GENERALLY RELEASE "ANY AND ALL
CLAIMS" AS A CONDITION OF FUTURE EMPLOYMENT
BECAUSE LABOR CODE SECTION 2804 SPECIFICALLY
PROHIBITS WAIVER OF AN EMPLOYEE'S CLAIM FOR
REIMBURSEMENT OF EMPLOYMENT-RELATED
EXPENSES.

The Group seems confused as to plaintiffs position. What plaintiff

asks the Court to rule is this: That an employer violates public policy when

The Group does not speak for all employers. See, for example, the
amicus brief of employers St. Jude Medical, S.C., Inc., Pacesetter, Inc. and
Advanced Bionics Corporation filed May 23, 2007, in support of plaintiffs
position.

1
(1) the employer requires its employee to sign a release of any and all
claims - past, present and future, known or unknown - relating to his or her
employment (except for accrued claims for employee benefits) as a
condition of obtaining future employment,2 and when (2) the employer
knows the employee may have an unaccrued claim for reimbursement for
employment-related expenses that by law the employee cannot be required
to waived. 3
That's all the Court of Appeal held. That's all this Court needs to
hold in order to protect plaintiff s rights.
Contrary to the Group's fears, such a ruling will not cause a mad
rush to the courthouse in every case in which the parties signed a general
release, in the employment context or in any other context. (Group Brief,

2 Andersen's proposed release was as broad and general as its lawyers

could conceivably make it, specifically excluding only accrued claims for
employee benefits: "Employee does hereby release and forever discharge
[Andersen] from any and all actions, causes of action, claims, demands,
debts, damages, costs, losses, penalties, attorney's fees, obligations,
judgment, expenses, compensation or liabilities of any nature whatsoever,
in law or equity, whether known or unknown, contingent or otherwise, that
Employee now has, may have ever had in the past or may have in the future
against any of the Released Parties by reason of any act, omission,
transaction, occurrence, conduct, circumstance, condition, harm, matter,
cause or thing that has occurred from the beginning of time up to and
included the date hereof, including, without limitation, claims that in any
way arise from or out of, are based upon or relate to Employee's
employment by, association with or compensation from [Andersen] or any
of its affiliated firms, except for claims (i) arising out of [Andersen's]
obligations set forth in this Agreement or (ii) for any accrued and unpaid
salary or other employee benefit or compensation owing to Employee as of
the date hereof." (3AA 579.)

3 The Group concedes that "requiring an employee (or any other party)
to execute such a release could potentially be a 'wrongful act' and the basis
for tort liability." (Group Brief, p. 17.)

2
p. 10.) As plaintiff posits the rule, only if an existing release implicates
nonwaivable claims, and only if an issue arises over the validity of the
release as to the portion that is nonwaivable, and only if the parties to the
release cannot agree on its enforceability (three big "ifs"), then and only
then would there even be an occasion for a court to intervene. Plaintiff does
not dispute that when all those "ifs" have occurred, a court could presume
that the parties intended to act lawfully and uphold the release only as to
claims that can lawfully be released. In appropriate circumstances, a court
could conform the release to the law.
But again, the Court doesn't have to go there. None of the "ifs" have
occurred in this case. Plaintiff never signed the release that Andersen
insisted he sign in order to obtain future employment with HSBC. And as a
direct, harmful consequence, Andersen improperly denied him the
opportunity to work for HSBC.
The Group simply begs the question of whether a release of "any and
all" claims purports to release claims that can't lawfully be released. The
Group makes the entirely circular argument that a release is intended to
extinguish a legal duty and "by definition" one cannot extinguish a duty that
cannot by law be extinguished. (Group Brief, p. 13.) Plaintiff agrees that
one cannot lawfully extinguish something that is lawfully inextinguishable,
but that does answer the question whether "any and all" means "some but
not others." The words "any and all" are as inclusive as lawyers can make
them. They do not reasonably permit of a non-inclusive meaning.
The ultimate question here is whether Andersen's attempt to
extinguish its inextinguishable legal duty under Labor Code sections 2802
and 2804, by threatening to withhold (and in fact withholding) from
plaintifffuture employment with HSBC, is a wrongful act. Plainly, it is.

3
(Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1145.) That's all plaintiff asks
the Court to decide in this regard.
The Group asserts, ipse dixit, that "employers do not typically ask
employees to surrender rights which they are legally incapable of
surrendering." (Group Brief, p. 14.) This assertion runs counter to
plaintiff's (and his co-employees') experience with Andersen, and to the
experience of the employees of other companies referred to in the amicus
briefs of Kastner Banchero LLP (at pp. 6-10) and St. Jude Medical, S.C.,
Inc. et al. (at pp. 2-3, th. I). Moreover, the Group's assertion flies in the
face of its own argument that general releases of "any and all claims" are
routinely required by employers in every employment severance situation
(Group Brief, pp. 1-2), even though such releases may be suspect in a
particular case. The Group wants the Court to assume that employers
typically act reasonably but employees and their lawyers typically do not.
The Group can't have it both ways.
The Group also asserts, in one breath, that "employees are presumed
to know the law" (Group Brief, p. 14) and, in the next breath, that
"unsophisticated parties do not know where the limits of legal enforcement
lie" (Group Brief, p. IS). Again, the Group can't have it both ways.
Moreover, if employees are presumed to know the law, so are employers.
And since in the vast majority of cases it is the employer who drafts the
release and presents it to a departing employee on a take or leave it basis,
the burden should be on the employers to ensure that the releases do not on
their face violate the law. If employers legitimately want to "buy their
peace," then they should take care to do so lawfully.

4
II. ANDERSEN'S RELEASE WRONGFULLY PURPORTED TO
WAIVE PLAINTIFF'S FUTURE CLAIMS FOR INDEMNITY
UNDER LABOR CODE SECTION 2802.

The Group asks this Court to decide whether a release of a claim

arising from past events claim for reimbursement of employment-related
expenses should be barred by Labor Code sections 2802 and 2804. (Group
Brief, p. 11.)
The Group again misunderstands the situation. Andersen's proffered
release purported to cover claims that have already accrued and claims that
might accrue in the future. The release says: "Employee does hereby
release and forever discharge [Andersen] from any and all . .. claims .
whether known or unknown, contingent or otherwise, that Employee .
may have in the future . ..." (3AA 579, emphasis added.)4
Plaintiff did not have an accrued claim under section 2802 arising
from past events. The critical issue for plaintiff was whether he could be
required to waive future rights under section 2802 based on any events, past
or future, as a condition of employment with HSBC. Clearly not. Plaintiff
in fact faced potential claims in the future relating to sales of Andersen-
created financial programs that proved to be invalid as tax-avoidance
schemes. Those sales events may have happened in the past, but no claim
had yet accrued. The lawsuits against plaintiff regarding Andersen's

4 The Group purports to intuit Andersen's and plaintiffs mutual intent

as to the scope of the release (Group Brief, pp.17-18, citing Safeco Ins. Co.
ofAmerica v. Robert S. (2001) 26 Ca1.4th 758), but the Group is apparently
under the misapprehension that Andersen and plaintiff actually executed the
release. They didn't. Plaintiff refused, for the very reason that Andersen
intended the release to include nonwaivable claims. An agreement's intent
cannot be gleaned when it there no agreement to start with.

5
abusive tax shelters would happen in the future. If plaintiff were sued in
the future, he would have the non-waivable right to indemnity from
Andersen under sections 2802 and 2804 for expenses incurred in defending
his conduct as an Andersen employee. (Douglas v. Los Angeles Herald-
Examiner (1975) 50 Cal.App.3d 449, 461.) He could not seek indemnity
now, because he has not incurred the expenses. Indemnity is one party's
obligation to make good a loss or damage that another party has already
incurred. (See Rooz v. Kimmel (1997) 55 Cal.AppAth 573, 582.)
The Court of Appeal decision, now depublished, did not hold that
waivers of accrued claims regarding past events would be invalid. The
issue was not presented. That Court even noted the potential distinction
between waivers of accrued claims and waivers of future claims when it
stated: "Assuming arguendo that indemnity was encompassed within
'compensation,' the exception was limited to compensation owing as of the
date the TONC was executed, improperly excluding any future indemnity
claims." (Slip Opinion, p. 30, emphasis added.)
Andersen knew it was a distinct possibility that plaintiff would incur
employment-related expenses ifhe were sued for conduct arising out of his
employment (such as a suit or even criminal prosecution for selling
Andersen-created tax shelters that had since been declared invalid), but no
such expenses had yet been incurred. (7AA 1316-1317, Exh. 24; 1263-
1264, ~ 44; 1265, ~ 51; 8AA 1509, Exh. 84.) The release would therefore
have been a purported advance waiver ofnon-waivable rights. Even the
Group would concede a waiver of future such rights would be
impermissible and violate public policy.

6
 CONCLUSION

The Employers Group amicus brief has offered the Court no

meaningful assistance in deciding the issues presented by the facts of this
case with regard to a general release of any and all claims. There will be no
calamitous repercussions if the Court holds, as it should, that an employer
violates public policy when it insists that an employee waive nonwaivable
claims as a condition of obtaining future employment.

Dated: June JL, 2007

LAW OFFICES OF RICHARD A. LOVE
Richard A. Love
Beth A. Shenfeld

GREINES, MARTIN, STEIN & RICHLAND LLP

Marc J. Poster
Robin Meadow

By M<t1t;Jf-t~-=-!-f-'-s-q.-------
Attorneys for Plaintiff and Appellant
RAYMOND EDWARDS II

7
 CERTIFICATE OF COMPLIANCE

Pursuant to California Rules of Court, rule 8.204 (c)(l), the attached

Answer To The Amicus Brief Of The Employers Group was produced
using 13-point Times New Roman type style and contains 1,784 words not
including the tables of contents and authorities, caption page, signature
blocks, or this Certification page, as counted by the word processing
program used to generate it.

Dated: June JL, 2007

LAW OFFICES OF RICHARD A. LOVE

GREINES, MARTIN, STEIN & RICHLAND LLP

8
 PROOF OF SERVICE

STATE OF CALIFORNIA )
)
COUNTY OF LOS ANGELES )

I am employed in the County of Los Angeles, State of California. I am over the age of 18
and not a party to the within action; my business address is 5700 Wilshire Boulevard, Suite 375,
Los Angeles, California 90036-3626.

On June 12, 2007, I served the foregoing document described as Answer To The
Amicus Brief Of The Employers Group on the interested parties in this action by placing a true
copy thereof enclosed in sealed envelopes as stated below.

xx BYMAIL

I caused such envelope to be deposited in the mail at Los Angeles, California. The
envelope was mailed with postage thereon fully prepaid as follows:

SEE ATTACHED SERVICE LIST

I am "readily familiar" with firm's practice of collection and processing correspondence

for mailing. It is deposited with U.S. postal service on that same day in the ordinary course of
business. I am aware that on motion of party served, service is presumed invalid if postal
cancellation date or postage meter date is more than I day after date of deposit for mailing in
affidavit.

Executed on June 12, 2007, at Los Angeles, California.

.2L (State) I declare under penalty of perjury under the laws of the State of California that the
foregoing is true and correct.
 SERVICE LIST

Wayne S. Flick, Esq.

Yury Kapgan, Esq.
Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007

Kristine L. Wilkes, Esq.

Colleen C. Smith, Esq.
Shireen M. Becker, Esq.
Latham & Watkins LLP
600 West Broadway, Suite 1800
San Diego, CA 92101-3375

Sharon A. McFadden, Esq. (courtesy copy)

Arthur Andersen LLP
33 West Monroe Street, Floor 18
Chicago,IL 60603-5385
Attorneys for Defendant and Respondent ARTHUR ANDERSEN LLP

Eric C. Kastner, Esq.

Scott R. Raber, Esq.
Newton Kastner & Remmel
20 California Street, 7th Floor
San Francisco, CA 94111
Attorneys for Amicus Curiae KASTNER BANCHERO LLP

James Pooley, Esq.

Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, CA 94304-1018

Mark A. Lemley, Esq.

Stanford School of Law
559 Nathan Abbott Way
Stanford, CA 94305-8610
Attorneys for Amicus Curiae LAW PROFESSORS AND WRITERS OF
LEARNED TREATIES

Paul Grossman, Esq.

Jennifer S. Baldocchi, Esq.
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street, 25th Floor
Los Angeles, CA 90071
Attorneys for Amici Curiae CALIFORNIA EMPLOYMENT LAW COUNCIL
and ACTIVISION, INC.
 SERVICE LIST (Continued)

James A. Gale, Esq.

Todd M. Malynn, Esq.
Michael J. Weber, Esq.
Feldman Gale, P.A.
880 West First Street, Suite 315
Los Angeles, CA 90012
Attorneys for Amici Curiae ST. JUDE MEDICAL, S.c., INC., PACESETTER, INC.
and ADVANCED BIONICS CORPORATION

Jeffrey K. Winikow, Esq.

Law Offices of Jeffrey K. Winikow
1801 Century Park East, Suite 1520
Los Angeles, CA 90067
Attorneys for Amicus Curiae CALIFORNIA EMPLOYMENT LAWYERS
ASSOCIATION

Scott H. Dunham, Esq.

O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071-2899
Attorneys for Amicus Curiae EMPLOYERS GROUP

Clerk for the

Honorable Andria K. Richey
Los Angeles Superior Court
111 North Hill Street
Los Angeles, CA 90012

Office of the Clerk

Court of Appeal
Second Appellate District, Division Three
300 South Spring Street
Second Floor, North Tower
Los Angeles, CA 90013-1233