Court Opinion

ID: 856596
Source: CourtListenerOpinion
Date Created: 2013-03-28 19:37:06.099086+00
Date Added: 2024-06-11T13:15:40.033166
License: Public Domain

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                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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,                                                                  2d Civil No. B241217
                                                                            (Super. Ct. No. 1384661)
     Plaintiff and Respondent,                                               (Santa Barbara County)

v.

BRUKER NANO, INC.,

     Defendant and Appellant.

                   Appellant Bruker Nano, Inc. (Bruker) purchased all of the stock of Veeco
Metrology (Veeco) and retained all of Veeco's employees, including respondent John
Zarate. When hired by Veeco, Zarate signed an employee confidentiality agreement
containing an arbitration provision. 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 Zarate's termination. Zarate sued, inter alia, for wrongful
termination and Bruker moved to compel arbitration. The trial court determined the
second agreement superseded the first and, consequently, there was no agreement to
arbitrate. We affirm.
                            FACTS AND PROCEDURAL BACKGROUND
                   In 2008, Zarate was hired by Veeco, a California based manufacturer of
high resolution microscopes. Zarate executed a three-page employee confidentiality and
inventions agreement (Veeco Agreement) that contains an arbitration provision requiring
him to submit "any claim or controversy arising out of [his] employment or the cessation
thereof . . . [to] binding arbitration." The document states that the terms of the agreement
apply as a condition of his employment or continued employment with Veeco, "its
subsidiaries, affiliates, successors or assigns."
              Two years later, Bruker, a Massachusetts based microscope manufacturer,
purchased 100% of Veeco's stock, and all of Veeco's existing employees, including
Zarate, began working for Bruker. During an orientation meeting, a Bruker
representative informed Zarate and the other Veeco employees that they would have to
sign several employment-related documents, including an employee patent and
confidentiality agreement (Bruker Agreement). The three-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 employment, Zarate brought this action
for wrongful termination in violation of public policy and waiting time penalties. Zarate
contends Bruker terminated him because he refused to engage in "illegal" marketing
activities. When Zarate refused to submit his claims to arbitration, Bruker petitioned to
compel arbitration based on the arbitration provision in the Veeco Agreement. Bruker
asserted that the Bruker Agreement did not supersede 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 arbitration. The court acknowledged that the
Bruker Agreement does not contain an integration clause or state that it supersedes all
prior agreements, but determined "it is apparent 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., confidentiality and inventions, were presented to
Zarate as a condition of employment 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 assignment provisions and define confidential
information very differently, causing the court to remark: "It makes no sense for

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[Bruker] to have presented [Zarate] with its own inventions and confidentiality agreement
if it did not intend to replace the prior agreement, 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 court did not reach Zarate's
contention that the Veeco arbitration provision is unconscionable 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. Although the trial court referred to the Bruker
Agreement as a substituted agreement, rather than a novation, Zarate concedes the
concept of novation is the appropriate "legal framework for review." As discussed
below, a novation is a "substituted contract" that completely extinguishes the original
obligation. (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 961, p. 1052;
see Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424, 431 (Wells
Fargo).) Where there is conflicting evidence, the question of whether the parties entered
into a novation or modification is a question of fact. (Wade v. Diamond A Cattle Co.
(1975) 44 Cal.App.3d 453, 457.) Where, as here, the issue turns upon the meaning of a
written instrument and no conflicting extrinsic evidence exists, then the 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 through Novation
              A novation is the "substitution 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 principles 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.

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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 appear' 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 the 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 evidence fails to clearly establish the
parties intended to substitute the Veeco Agreement for the Bruker Agreement. We
disagree. Bruker could have held Zarate to the terms of the Veeco Agreement. Instead, it
required Zarate to sign a new agreement addressing the same confidentiality and
inventions issues, but containing very different terms. A court may infer novation when a
new agreement is so inconsistent with the earlier agreement that the two cannot subsist
together. (Producers Fruit Co. v. Goddard (1925) 75 Cal.App. 737, 754-755; see 14A
Cal.Jur.3d, supra, at § 293, pp. 175-176, fns. omitted ["Whether the new contract was
intended as a substitute for the old may be inferred where the 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 time"].) 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,

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Bruker required Zarate to sign numerous employment documents which, in large part,
duplicated the Veeco employment 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 law; the Bruker Agreement is
subject to Massachusetts law. The Veeco Agreement prohibits employees from
disclosing confidential or proprietary information during the period of employment and
for five years after, while the Bruker Agreement prohibits the disclosure of such
information at any time "during, or subsequent 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 agreements also define "confidential information"
very differently. As a result, an employee could fully comply 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, others 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 for the earlier agreement to remain in effect.
That Bruker compelled its employees to represent that they had no conflicting obligations
is clear evidence that Bruker intended to supersede the 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 confidentiality agreement if it did not
intend to replace the prior agreement . . . ."
                                       CONCLUSION
              As a novation, the Bruker Agreement completely extinguished the Veeco
Agreement, including the arbitration provision. (See Wells Fargo, supra, 32 Cal.App.4th
at p. 431.) Had Bruker wished an arbitration provision, it should have included one in the
successor agreement.

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              Without an agreement to arbitrate, Zarate cannot be compelled to submit
the parties' dispute to arbitration. (Cione v. Foresters Equity Services, Inc. (1997) 58
Cal.App.4th 625, 634 ["'The right 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 disputes 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 arbitration provision is procedurally and substantively
unconscionable.
              The order of the trial court is affirmed. Zarate shall recover his costs on
appeal.

              NOT TO BE PUBLISHED.

                                           PERREN, J.

We concur:

              GILBERT, P. J.

              YEGAN, J.

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                              Colleen K. Sterne, Judge

                       Superior Court County of Santa Barbara

                        ______________________________

             Nixon Peabody, Bonnie Glatzer, Ellen M. Papadakis and Tzaddi S.
Thompson for Defendant and Appellant.
             Law Offices of Lauren John Udden, Lauren John Udden; Law Office of
Herb Fox and Herb Fox for Plaintiff and Respondent.

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