Elgiadi v. Wash. State Univ. Spokane, 38784-4-III
| Docket Number | 38784-4-III |
| Decision Date | 08 November 2022 |
| Citation | 519 P.3d 939 |
| Parties | Saleh ELGIADI, on behalf of himself and all others similarly situated, Appellant, v. WASHINGTON STATE UNIVERSITY SPOKANE, an agency of the State of Washington and The State of Washington, Respondents. |
| Court | Washington Court of Appeals |
Kevin W. Roberts, Chad Harrison Freebourn, Roberts | Freebourn, PLLC, 1325 W 1st Ave. Ste. 303, Spokane, WA, 99201-4600, for Appellant.
Carl Perry Warring, Evans, Craven & Lackie, P.S., 818 W Riverside Ave. Ste. 250, Spokane, WA, 99201-0910, Office of the Attorney General of Washington, 1116 W. Riverside, Spokane, WA, 99201, for Respondents.
PUBLISHED OPINION
¶ 1 Settling parties in employment discrimination cases sometimes include a no-rehire provision in their settlement agreements. In the provision, the former employee agrees not to seek or accept employment from the former employer. The question presented here is whether a former employee who settles a claim of unlawful discrimination may effectively waive their contingent right to be rehired. We conclude they may and affirm the trial court's summary judgment rulings.
¶ 2 Saleh Elgiadi worked for Washington State University (WSU) for 29 years. During this time, he worked in information technology, eventually becoming the chief information technology officer for WSU-Spokane's information technologies systems (ITS) department. Following a wage dispute, WSU terminated his employment.
¶ 3 Mr. Elgiadi brought suit against WSU and the State of Washington (collectively the State) alleging breach of contract, promissory estoppel, wrongful termination in violation of public policy, negligent misrepresentation, intentional misrepresentation, intentional interference with a business expectancy, retaliation, and age discrimination. His request for relief included lost wages, benefits, back wages, front pay, double damages, prejudgment interest, and attorney fees; he did not ask to be reinstated. His claim for age discrimination was dismissed on summary judgment.1
¶ 4 In early 2020, Mr. Elgiadi and the State entered into a settlement agreement. The agreement required Mr. Elgiadi to release the State from all claims arising out of his former employment. In exchange, the State agreed to pay Mr. Elgiadi $295,000. The agreement contained the following provision, which provides only one limitation on Mr. Elgiadi's future employment:
3. As a condition of this settlement, State of Washington requires that Plaintiff agree he will neither seek nor accept employment with WASHINGTON STATE UNIVERSITY-SPOKANE, at any time in the future. ... The parties agree this required limitation applies only to employment with WSU-Spokane and that it does not prevent Plaintiff for [sic] working for an independent contractor providing services, consulting, acting as a vendor or other contractors providing materials, supplies or services to WSU-Spokane.
Clerk's Papers (CP) at 30 (emphasis added).
¶ 5 Seven months later, Mr. Elgiadi brought suit against the State. His suit sought class action status for all former State employees whose discrimination claim settlements included a no-rehire provision.
¶ 6 Pertinent to the issues on appeal, Mr. Elgiadi's complaint asserts that the above-italicized provision—referred to hereafter as the "no-rehire provision"—violates the public policy behind the Washington Law Against Discrimination (WLAD), chapter 49.60 RCW, violates WLAD's antiretaliation statute ( RCW 49.60.210 ), and is an unlawful restraint of trade ( RCW 49.62.020 ). The State denied that the provision violated those laws and affirmatively asserted defenses—including the defenses of waiver, accord and satisfaction, equitable estoppel, and judicial estoppel.
¶ 7 Prior to seeking class certification, Mr. Elgiadi filed a motion for partial summary judgment requesting the trial court declare the no-rehire provision void and unenforceable. The State filed a cross motion for summary judgment, requesting dismissal of Mr. Elgiadi's claims. The trial court denied the former and granted the latter. Mr. Elgiadi timely appealed the trial court's rulings.
¶ 8 We review a trial court's summary judgment ruling de novo, taking all facts and inferences in the light most favorable to the nonmoving party. NOVA Contracting, Inc. v. City of Olympia , 191 Wash.2d 854, 864, 426 P.3d 685 (2018).
¶ 9 Settlement agreements are governed by the legal principles of contract law. Stottlemyre v. Reed , 35 Wash. App. 169, 171, 665 P.2d 1383 (1983). Mr. Elgiadi does not dispute that he voluntarily entered into the settlement agreement. Instead, he seeks to have the no-rehire provision declared void and unenforceable, to have it struck from the agreement, and to retain the $295,000 paid to him by the State.
¶ 10 Through compromise and settlement, parties agree to dismiss disputed claims by making mutual concessions. Harding v. Will , 81 Wash.2d 132, 138, 500 P.2d 91 (1972) ; 15B AM. JUR. 2D COMPROMISE AND SETTLEMENT AGREEMENTS § 1 (2021). By its nature, settlement does not secure a party the same vindication that might be won through litigation. Instead:
Each party generally accepts something less than that to which he believes he is entitled based on a decision that the compromise is more advantageous to him than the sum of the risks and benefits involved in pursuing the claim.
Strozier v. Gen. Motors Corp. , 635 F.2d 424, 425 (5th Cir. 1981). The law favors settlements and the finality they afford. Haller v. Wallis , 89 Wash.2d 539, 544, 573 P.2d 1302 (1978). Washington's jurisprudence recognizes a strong public policy encouraging settlements. Am. Safety Cas. Ins. Co. v. City of Olympia , 162 Wash.2d 762, 772, 174 P.3d 54 (2007) ; City of Seattle v. Blume , 134 Wash.2d 243, 258, 947 P.2d 223 (1997) ; Seafirst Ctr. Ltd. P'ship v. Erickson , 127 Wash.2d 355, 366, 898 P.2d 299 (1995).
¶ 11 Generally, a defendant chooses to settle in order to avoid potential liability and further attorney fees. These purposes would be thwarted if the settling plaintiff could receive a substantial settlement and then sue the defendant again and cause it to incur further potential liability and attorney fees. Here, the State sought to ensure this did not happen by including the no-rehire provision. Without it, Mr. Elgiadi could apply for rehire, be denied employment even for nonretaliatory reasons, and the State would face potential liability and further attorney fees.
¶ 12 Before we address Mr. Elgiadi's arguments, we discuss what his remedy would be if he succeeds in having the no-rehire provision declared void and unenforceable.
¶ 13 It is uncontested that the no-rehire provision was material in obtaining the State's assent to pay Mr. Elgiadi $295,000. The paragraph containing the no-rehire provision provides:
The parties understand and agree that [the State] has required this paragraph as a material provision of this Agreement and that any breach of this paragraph shall be a material breach of this Agreement and that the State would be irreparably harmed by violation of this provision.
¶ 14 After oral argument, we asked the parties for supplemental briefing discussing what the proper remedy would be were we to invalidate the no-rehire provision. Mr. Elgiadi argues a provision in a settlement agreement that violates public policy can be "lined out" in accordance with the "blue pencil test" and the remainder of the agreement enforced. Appellant's Suppl. Br. at 2. The State argues the entire agreement fails if the provision declared unenforceable was objectively material to the parties’ agreement. Resp't’s Suppl. Br. at 2-10. We agree with the State.
¶ 15 When a court declares a provision in an agreement unenforceable, a question arises whether the provision is severable from the contract or whether the entire contract fails. Years ago, our Supreme Court rejected the "blue pencil test" of contract severability:
The enforcement of ... a contract does not depend upon mechanical divisibility, meaning that offending portions of the covenant can be lined out and still leave the remainder grammatically meaningful and thus enforceable. This is the so-called "blue pencil test." The better test is whether partial enforcement is possible without injury to the public and without injustice to the parties.
Wood v. May , 73 Wash.2d 307, 313, 438 P.2d 587 (1968).
¶ 16 A more recent analysis of the doctrine of severability occurred in State v. Chambers , 176 Wash.2d 573, 580-83, 293 P.3d 1185 (2013), where the court applied contract principles to a criminal plea agreement. In Chambers , the defendant committed a series of crimes in February and May 1999. Id . at 577-79, 293 P.3d 1185. He pleaded guilty to those crimes. Id . at 577-78, 293 P.3d 1185. Prior to being sentenced, he committed additional crimes in November 1999. Id . at 578, 293 P.3d 1185. As part of a global plea deal, the defendant agreed to a 240-month sentence for his November crimes to be served consecutive to the yet-to-be imposed sentence for the earlier crimes. Id . at 578-79, 293 P.3d 1185. The defendant was sentenced for the February and May crimes, and later was sentenced for the November crimes. Id . at 579-80, 293 P.3d 1185.
¶ 17 Years later, a court permitted the defendant to withdraw his guilty plea to the February crimes. Id . at 580, 293 P.3d 1185. The withdrawal of that plea resulted in a lower offender score than that used in the defendant's sentence for the November crimes. Id . Because the offender score determines the length of a sentence, the defendant asked to be resentenced for the November crimes. Id . The trial court refused. Id . We reversed and our Supreme Court accepted the State's petition for review. Id .
¶ 18 In Chambers , our high court reviewed the history of the plea deal for the November crimes. Id . at 581-84, 293 P.3d 1185. It noted that the...
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