NYULASSY V. LOCKHEED MARTIN CORP. 16 Cal.Rptr.3d 296 (2004) CASE BRIEF

NYULASSY V. LOCKHEED MARTIN CORP.

16 Cal.Rptr.3d 296 (2004)

NATURE OF THE CASE: Nyulassy (P), employee, sued Lockheed (D), employer, alleging that D demoted him in retaliation for his protected workplace activity. D moved to compel arbitration and stay all proceedings, based upon a mandatory arbitration clause in an employment agreement. The Superior Court of Santa Clara County (California) denied the motion, and D appealed.

FACTS: P was employed for approximately 20 years by Western Development Labs and/or Loral Aerospace Corporation. P's prior employers were acquired by D. In December 1994, D's predecessor terminated P. P brought an action in Santa Clara Superior Court asserting a claim for age discrimination. The parties to the prior case settled their dispute in November 1997 and signed the agreements that are central to the issue of the arbitrability of the present dispute. The terms of the settlement included a payment to P and an agreement that D would hire P as an employee. The settlement agreement was signed by P; it was also signed by attorney Widmann, as P's counsel, below the block lettering, 'APPROVED AS TO FORM.' The agreement included an arbitration clause. The settlement agreement also contained a general provision that the parties in the prior case had been represented by counsel; it included a statement that the parties had carefully read and reviewed the terms of the agreement with their respective counsel and were 'freely and voluntarily entering into it.' P and D signed an employment agreement on a modified standard form document. P was terminable only for good cause for a period of three years after the date of his employment, notwithstanding the 'at-will' provision in the form employment agreement. The settlement agreement also contained supplemental terms of P's employment, including starting salary, the identity of P's supervisor, and other specifics. The employment agreement provided that all disputes or controversies that P had concerning his employment would be subject to binding arbitration conducted under the employment dispute resolution rules of the American Arbitration Association. P waived all rights to pursue any claims against D through judicial proceedings. P was also required to attempt to resolve any employment disputes by engaging in discussions with various levels of management. P also waived his arbitration remedy if he did not exercise it within 180 days of his employment termination (if a termination claim), or, alternatively, within 180 days after such other dispute or controversy arose. Arbitration was P's sole and exclusive remedy. P sued D alleging that D demoted him in retaliation for his protected workplace activity (i.e., complaints about treatment of employees and resistance to employer-sanctioned illegal activity). P alleged claims for breach of contract, breach of the covenant of good faith and fair dealing, wrongful demotion in violation of public policy, and violation of section 6310 of the Labor Code. D moved to compel arbitration and stay all proceedings (motion), based upon a mandatory arbitration clause in P's employment agreement. In opposition to the motion, P declared that, as part of settling the prior case, he was required to sign the employment agreement and a proprietary information agreement, and that '[t]here was no negotiation over any of the terms of these agreements. P stated further that he had been out of work after being terminated by defendant's predecessor, and that, 'if [he] wanted to settle [his] case[, he] would have to do what all-new [sic] employees do and that is sign the employment agreement and proprietary information agreements concerning which no negotiations were tolerated by LOCKHEED.' Widmann declared that he had represented plaintiff in both the prior case and in the instant action. He summarized the allegations in the prior case and described it as 'hard fought' litigation that lasted nearly three years. During settlement negotiations shortly before trial scheduled in September 1997, D 'abruptly' made an employment offer to plaintiff. Widmann declared that, under the terms of the settlement reached in the prior case, in order to be hired, P 'was required to submit a resume, complete an employment application, sign a proprietary agreement and the standard employment agreement which LOCKHEED was using at that time. These documents were not negotiated by the parties and, indeed, were non-negotiable.' Widmann twice repeated in his declaration that the terms of the employment agreement were nonnegotiable. D's motion relied on the content of the agreements. D submitted no declarations in reply to P's and Widmann's declarations. The trial court denied the motion, and D appeals that decision. The court stated: 'After consideration of the papers on file and the arguments of counsel, the motion is DENIED. The agreement is unenforceable because it is unconscionable. The unconscionability cannot be cured through severance or restriction.

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