Labor & Employment Law Daily Wrap Up, CONTRACT CLAIMS—11th Cir.: Employee’s counterclaim remanded for determination of whether Georgia or California law applied, (Aug 28, 2025)

By Ronald Miller, J.D.

The choice-of-law provision in the employment agreement was limited to the agreement itself and not to any tort claims that arose from the agreement.

A district court erred by dismissing an employee’s counterclaim under California law because her employment agreement’s choice-of-law provision did not require that Georgia law govern the counterclaim, ruled the Eleventh Circuit, in an unpublished decision. Accordingly, the appeals court vacated the district court’s dismissal of the employee’s counterclaim and remanded the matter for the district court to decide in the first instance whether Georgia or California substantive law governs the counterclaim and to address the fact-sensitive issues inherent in applying the California statute (NetRoadshow, Inc. v. Carrandi, No. 25-10388 (11th Cir. Aug. 25, 2025, unpublished)).

Restrictive covenants. NetRoadshow is a company that provides “internet road-shows” to the investment banking community. The employee started working for NetRoadshow in 2005 as an account manager and was subsequently promoted to an executive position. He entered into an employment agreement that contained multiple restrictive covenants, including non-compete and confidentiality clauses. The agreement also had a choice-of-law provision that provided that the agreement would be governed by and construed in accordance with the laws of the State of Georgia.

In 2023, the employee resigned from her position at NetRoadshow and was thereafter hired by a competitor.

Preliminary injunction. NetRoadshow sued the employee in a Georgia state court, arguing that she breached her employment agreement’s non-compete and confidentiality covenants by working for the competitor. The employee removed the action to federal court and filed a counterclaim based on a California statute. She asserted that under the California statute the non-compete provision in her employment agreement was void and sought an injunction prohibiting NetRoadshow from attempting to enforce the provision in the future. The California statute, Cal. Bus. & Prof. Code § 16600.5(e), provides an employee with a cause of action against her former employer if it attempts to enforce a void restrictive covenant in an employment agreement.

For its part, NetRoadshow moved for a preliminary injunction to enforce the relevant portions of the employment agreement. After initially granting NetRoadshow’s motion in part as to the non-compete clause, on reconsideration the district court vacated its earlier order and denied the preliminary-injunction motion because it found that NetRoadshow did not establish a substantial likelihood that it would succeed on the merits of its breach-of-contract claim. The court concluded that the non-compete clause was void under Georgia law because it was too broad and indefinite to be enforceable.

Counterclaim. NetRoadshow moved to dismiss the employee’s counterclaim, arguing that she could not assert a claim under California law because the employment agreement was controlled by Georgia law. On September 10, 2024, the district court granted NetRoadshow’s motion to dismiss, concluding that the employee could not state a claim under § 16600.5(e) because Georgia law controlled the resolution of her counterclaim based on the agreement’s choice-of-law provision, which meant that she could not use California law to hold NetRoadshow liable. The court then granted summary judgment to the employee as to NetRoadshow’s breach-of-contract claim. The employee appealed the dismissal of her counterclaim.

Choice-of-law provision. On appeal, the employee first argued that the district court erred in ruling that the employment agreement’s choice-of-law provision barred her from raising a claim under § 16600.5(e) because the district court previously ruled that the non-compete clause was void. Second, she argued that the district court erred by concluding that Georgia law controls her counterclaim because her § 16600.5(e) claim is beyond the scope of the choice-of-law provision.

With respect to the first argument, the employee contended that the district court’s conclusion that the employment agreement’s non-compete clause was void rendered the choice-of-law provision void, so the court should not have found that the latter provision precluded her from raising her California state law counterclaim. The Eleventh Circuit disagreed.

As an initial matter, the appeals court noted that it must apply Georgia state law to determine what substantive law governs the employee’s counterclaim because the district court was exercising diversity jurisdiction.

Georgia law. The Georgia Court of Appeals has explained that a void restrictive covenant does not automatically invalidate an entire contract when the parties clearly intended for the contract to be severable. Here, the employee’s employment agreement contained a severability clause. Because the agreement contains a severability clause, the district court’s conclusion that the non-compete clause was void did not automatically invalidate the choice-of-law provision.

However, the appeals court agreed with the employee’s second argument that the district court erred in concluding that Georgia law controlled her counterclaim because the choice-of-law provision in the employment agreement was limited to the agreement itself and not to any tort claims that arose from the agreement, including her § 16600.5(e) claim.

Georgia courts will enforce choice-of-law provisions “unless application of the chosen law would be contrary to the public policy or prejudicial to the interests of this state.” However, the applicability of a choice-of-law provision to a claim for relief depends on the scope of the provision and the nature of the claim.

Tort claims. Under Young v. W.S. Badcock Corp., Georgia Court of Appeals case, to determine whether the choice-of-law provision in the employee’s employment agreement controls her counterclaim, the appeals court must consider (1) whether the scope of the provision extends to tort claims that arise from the agreement, and (2) whether the employee’s counterclaim sounds in tort or contract.

The choice-of-law provision in the employee’s employment agreement does not “state that any and all claims arising out of the relationship between the parties shall be governed by [Georgia] law.” Rather, it merely states, “this Agreement and the rights of Company and Employee hereunder shall be governed by and construed in accordance with the laws of the State of Georgia,” and it does not include any language suggesting that Georgia law would cover tort claims arising out of the contractual relationship. Moreover, nothing in the provisions suggests that it extends to claims that arise from the agreement but are based on rights and duties external to the agreement, that is, tort claims.

Applying Young, the appeals court concluded that the choice-of-law provision in the employee’s employment agreement does not apply to tort claims that arise from the agreement. Therefore, the provision does not require the application of Georgia law to her counterclaim if the claim sounds in tort.

Sounding in tort. In determining whether a claim that arises from a contractual relationship sounds in contract or tort, Georgia courts look to the source of the legal duty that is the asserted basis for liability. If the asserted duty is derived from the terms of a contract, then the claim sounds in contract, but if the asserted duty is derived from a source external to the contract, such as a statute, then the claim sounds in tort.

Applying this principle, the appeals court concluded that the employee’s counterclaim sounds in tort. The asserted basis for liability is derived not from the terms of the employment agreement but from a source external to the agreement, a California statute, so the counterclaim sounds in tort. Accordingly, the choice-of-law provision does not require that Georgia law govern the employee’s counterclaim.

The case is No. 25-10388.

Judge: Per curiam.

Attorneys: Kana Caplan (Krevolin & Horst) for NetRoadshow, Inc. Michael David Flint (McClure & Kornheiser) for Lisa Carrandi.

Companies: NetRoadshow, Inc.

Cases: ContractClaims StateLawClaims TortClaims Procedure AlabamaNews FloridaNews GeorgiaNews