Filed 3/28/13 Zarate v. Bruker Nano CA2/6 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

JOHN ZARATE,
Plaintiff and Respondent,

v.
BRUKER NANO, INC.,
Defendant and Appellant. 2d Civil No. B241217 (Super. Ct. No. 1384661)

(Santa Barbara County)

Appellant Bruker Nano, Inc. (Bruker) purchased all of the stock of Veeco Metrology (Veeco) and retained all of Veec o's employees, including respondent John Zarate. When hired by Veeco, Zarate si gned an employee conf identiality agreement containing an arbitration pr ovision. Zarate later signed a similar confidentiality agreement with Bruker, but it did not provide for arbitration. A dispute arose between Zarate and Bruker, resulting in Za rate's termination. Zarate sued, inter alia, for wrongful termination and Bruker moved to compel arb itration. The trial court determined the second agreement superseded the first and, consequently, there was no agreement to
arbitrate. We affirm.
FACTS AND PROCEDUR AL BACKGROUND In 2008, Zarate was hired by Veec o, a California based manufacturer of high resolution microscopes. Zarate execut ed a three-page empl oyee confidentiality and inventions agreement (Veeco Ag reement) that contains an arbitration provision requiring2 him to submit "any claim or controversy aris ing out of [his] empl oyment or the cessation thereof . . . [to] binding arbitration." The doc ument states that the terms of the agreement apply as a condition of his em ployment or continued employment with Veeco, "its subsidiaries, affiliates, su ccessors or assigns." Two years later, Bruker, a Massachuse tts based microscope manufacturer, purchased 100% of Veeco's stock, and a ll of Veeco's existing employees, including Zarate, began working for Bruker. Duri ng an orientation meeting, a Bruker representative informed Zarate and the othe r Veeco employees that they would have to sign several employment-related documents , including an employee patent and confidentiality agreement (Bru ker Agreement). The thre e-page Bruker Agreement addresses virtually the same subject matter as the Veeco Agreement, but does not contain an arbitration provision.
After Bruker terminated Zarate's em ployment, Zarate brought this action for wrongful termination in vi olation of public policy and waiting time penalties. Zarate
contends Bruker terminated him because he refused to engage in "illegal" marketing
activities. When Zarate refuse d to submit his claims to arb itration, Bruker petitioned to compel arbitration based on the arbitration provision in the Veeco Agreement. Bruker asserted that the Bruker Agreement did not s upersede the Veeco Agreement and that both agreements, including the Veeco arbitration provision, are fully enforceable. The trial court denied the petition, concluding Zarate never consented to have his claims against Bruker submitted to ar bitration. The court acknowledged that the Bruker Agreement does not contain an integra tion clause or state that it supersedes all prior agreements, but determined "it is appare nt on reading the [Bruker] agreement that it was intended to replace the Veeco document. " The court noted that both agreements concern the same subject matter, i.e., confid entiality and inventions, were presented to Zarate as a condition of empl oyment and include "a number of inconsistent provisions that would be very difficult to enforce if both agreements were in effect." The two agreements have dissimilar disclosure and a ssignment provisions a nd define confidential information very differently, causing the court to remark: "It makes no sense for3 [Bruker] to have presented [Z arate] with its own inventions and confidentiality agreement if it did not intend to replace the prior ag reement, which, while containing similar provisions, was also very different in its terms." Having decided that the Veeco Agreement was superseded by the later agreement, the c ourt did not reach Zarate's
contention that the Veeco arb itration provision is uncons cionable and unenforceable. Bruker appeals.
DISCUSSION Standard of Review This appeal turns on whether the Bruker Agreement was a novation or modification of the Veeco Agreement. Altho ugh the trial court referred to the Bruker Agreement as a substituted agreement, rath er than a novation, Zarate concedes the concept of novation is the appropriate "leg al framework for review." As discussed below, a novation is a "substituted contract" that completely extin guishes the original obligation. (1 Witkin, Summary of Cal. La w (10th ed. 2005) Contracts, § 961, p. 1052;

see Wells Fargo Bank v. Bank of America (1995) 32 Cal.Ap p.4th 424, 431 ( Wells Fargo ).) Where there is conflicting evidence, th e question of whether the parties entered
into a novation or modificati on is a question of fact. ( Wade v. Diamond A Cattle Co

. (1975) 44 Cal.App.3d 453, 457.) Where, as he re, the issue turns up on the meaning of a written instrument and no conflicting extrinsic ev idence exists, then th e question is one of law subject to de novo review. ( Howard v. County of Amador (1990) 220 Cal.App.3d 962, 980 ( Howard ).) The Bruker Agreement Superseded the Veeco Agreement th rough Novation
A novation is the "substitu tion of a new obligation for an existing one" with the intent to extinguish the latter. (Civ. Code, § 1530; 1 Meadows v. Lee (1985) 175 Cal.App.3d 475, 482, fn. 1.) Under principl es of novation, a new contract may be
substituted for an old contract by creating a new obligation between the same parties or

1 All statutory references are to the Civil Code.4 with a new party. (§§ 1531, 1532.) Thus, a novation is a "new contract which supplants the original agreement and 'completely extinguishes the original obligation . . . .'" ( Wells Fargo, supra, 32 Cal.App.4th at p. 431 .) In contrast, a modification does not terminate the preexisting contract. ( Davies Machinery Co. v. Pine Mountain Club, Inc. (1974) 39 Cal.App.3d 18, 25.) A subsequent agreement that expressly recognizes and affirms the continuing existence and validity of the original agreement is a modification rather than a novation. ( Howard, supra, 220 Cal.App.3d at pp. 977-978.) The question of whether a novation has occurred is always one of intent. ( Howard, supra, 220 Cal.App.3d at pp. 977-978; Wells Fargo, supra , 32 Cal.App.4th at p. 432.) It must "'clearly app ear' that the parties intended to extinguish rather than merely modify the original agreement." ( Howard, at p. 977.) Intent need not be express, however, it may be inferred from the circumstances and the conduct of the parties. (14A Cal.Jur.3d (2008) Contracts, § 293, p. 175; see Alexander v. Angel (1951) 37 Cal.2d 856, 860.) The parties do not have to state that th e original contract was rescinded, so long as
the intent to abandon can be ascertained from the acts and conduct of the parties. ( Hunt v. Smyth (1972) 25 Cal.App.3d 807, 818.)
Bruker contends the uncontroverted ev idence fails to cl early establish the parties intended to substitute the Veeco Agreement for th e Bruker Agreement. We disagree. Bruker could have held Zarate to the terms of the Veeco Ag reement. Instead, it required Zarate to sign a new agreement addressing th e same confidentiality and inventions issues, but containing very differe nt terms. A court may infer novation when a new agreement is so inconsistent with the ea rlier agreement that the two cannot subsist together. ( Producers Fruit Co. v. Goddard (1925) 75 Cal.App. 7 37, 754-755; see 14A Cal.Jur.3d, supra, at § 293, pp. 175-176, fns. omitte d ["Whether the new contract was
intended as a substitute for th e old may be inferred where th e terms of the new contract differ widely from those of the old, especially where the two are entirely inconsistent and cannot be operative at the same ti me"].) Such is the case here. It is undisputed that after the stock purchase, all Veeco employees, including Zarate, became full -fledged Bruker employees. As a condition of employment,5 Bruker required Zarate to sign numerous em ployment documents which, in large part, duplicated the Veeco employm ent documents. The Bruker and Veeco Agreements have similar titles and address virtually all the same issues, but are inconsistent in many respects. The Veeco Agreement is governed by California la w; the Bruker Agreement is subject to Massachusetts law. The Ve eco Agreement prohibits employees from disclosing confidential or proprietary informa tion during the period of employment and for five years after, while the Bruker Ag reement prohibits the disclosure of such information at any time "during, or subseque nt to, the Employee's employment." The Veeco Agreement requires the employee to assign to the company each invention, discovery, or idea made or conceived during the period of employment, that relates directly or indirectly to Veeco's business. In contrast, the Bruker Agreement requires the assignment of inventions during the period of employment or within three months after termination of employment. The two agreemen ts also define "confidential information" very differently. As a result, an employee could fully comp ly with one agreement while breaching the other. Notably, the Bruker Agreement required Zarate to "represent[] that he/she has no agreements with, or obligations to, othe rs in conflict with the foregoing [terms]." Given the conflicting terms in the two confidentiality agreements, Zarate could not make this representation if the parties had intended fo r the earlier agreement to remain in effect. That Bruker compelled its empl oyees to represent that they had no conflicting obligations
is clear evidence that Bruk er intended to supersede th e Veeco Agreement through novation. As the trial court observed, "[i]t makes no sense for [Bruker] to have presented [Zarate] with its own inventions and confidentia lity agreement if it did not intend to replace the prior agreement . . . ."
CONCLUSION As a novation, the Bruker Agreemen t completely extinguished the Veeco Agreement, including the arb itration provision. (See Wells Fargo, supra, 32 Cal.App.4th at p. 431.) Had Bruker wished an arbitrati on provision, it should have included one in the successor agreement.6 Without an agreement to arbitrate, Zarate canno t be compelled to submit the parties' dispute to arbitration. ( Cione v. Foresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, 634 ["'The ri ght to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. [Citations.] There is no public policy favoring arbitration of disput es which the parties have not agreed to arbitrate. [Citation.]' [Citation.]"].) Thus, the trial court properly denied Bruker's petition to compel arbitration.
Because we concur with the trial court's decision, we need not reach
Zarate's contention that the Veeco arbitrati on provision is procedurally and substantively
unconscionable.
The order of the trial court is affi rmed. Zarate shall recover his costs on appeal.

NOT TO BE PUBLISHED.

PERREN, J.

We concur:

GILBERT, P. J.

YEGAN, J.7 Colleen K. Sterne, Judge
Superior Court County of Santa Barbara

________________ ______________
Nixon Peabody, Bonnie Glatzer, E llen M. Papadakis and Tzaddi S. Thompson for Defenda nt and Appellant. Law Offices of Lauren John Udden, Lauren John Udden; Law Office of
Herb Fox and Herb Fox for Plaintiff and Respondent.