It isn't a wage & hour case, but this is the most ridiculous b.s. settlement tactic we've ever seen in an employment dispute: Nelson v. American Apparel, Inc. In an unpublished opinion, which should be published if for no other reason than so that people will read the facts, the Second District enforced an arbitration agreement under the most bizarre of circumstances:
Defendants, American Apparel, Inc., Dov Charney, and Martin Bailey, appeal from an order denying their petition to compel arbitration under a settlement agreement. Defendants seek to arbitrate two issues. First, defendants seek to arbitrate the issue of whether plaintiff, Nancy Nelson, and her attorneys breached the settlement agreement by failing to appear in San Francisco at an “arbitration” with foreordained facts and a predetermined award which would be followed by the issuance of a misleading press release. Second, defendants seek to compel arbitration of whether plaintiff or her attorneys breached the confidentiality provisions of the settlement agreement. We conclude the language in the arbitration clauses in the settlement agreement required the petition to compel arbitration of these two disputes be granted. We emphasize defendants are not seeking to compel arbitration of the questionable “arbitration” with foreordained facts and a predetermined award which would be followed by the issuance of a misleading press release.
Here are the facts:
On May 4, 2005, plaintiff filed an action against defendants American Apparel, Inc., its chief executive officer, Mr. Charney, and a vice president, Mr. Bailey. Plaintiff alleged that during her employment as a sales manager for American Apparel, Inc., Mr. Charney subjected her to a hostile work environment based on her gender by regularly making unwelcome, inappropriate comments, and suggestive non-verbal gestures, and ultimately wrongfully terminating her employment. In her first amended complaint, filed on September 19, 2005, plaintiff asserted causes of action for violations of the Government, Labor, and Business and Professions Codes, wrongful termination in violation of public policy, and defamation. The matter was set for trial on January 24, 2008.
On January 23, 2008, however, the parties entered into the settlement agreement. In the settlement agreement, defendants, without admitting liability, agreed to pay plaintiff $1.3 million. Also, plaintiff agreed to release all of her claims against defendants and to dismiss the present lawsuit. Additionally, the parties agreed that an arbitrator selected by and paid for by defendants would enter a specified award (stated word for word) in defendant’s favor based on a stipulated record.
Paragraph 7 of the settlement agreement provided in part: “Confidential Arbitration [¶] The parties agree to conduct a confidential arbitration pursuant to the following terms and conditions: [¶] (a) The Arbitrator shall be selected by American Apparel at its sole and unfettered discretion. The Arbitrator’s fee will be paid by American Apparel. [¶] (b) The issue presented to the Arbitrator will be, ‘Did American Apparel or Dov Charney subject Mary Nelson to unlawful sexual harassment in violation of the California Fair Employment & Housing Act.’ [¶] (c) The Arbitrator will issue a decision based solely on the following stipulated record: [¶] (i) The Supreme Court’s decision in Lyle v. Warner Brothers Television Productions, including the concurring opinion by Justice Chin, 38 Cal.4th 264 (2006), is the governing law. [¶] (ii) Nelson complains that she was unlawfully harassed by American Apparel’s marketing materials, as well as the use of sexual speech by employees of American Apparel. [¶] (iii) Dov Charney never sexualized, propositioned or made any sexual advances of any nature whatsoever towards Mary Nelson. [¶] (iv) The marketing materials, sexual speech and much of the conduct about which Nelson complains are protected under the First Amendment’s guarantee of free speech. [¶] (v) The remainder of the speech and conduct about which Nelson complains was not directed at her or other women because of their gender. [¶] (d) The Arbitrator’s decision will state only the following: [¶] ‘Mary Nelson was not subjected to unlawful sexual harassment in violation of the California Fair Employment & Housing Act. Dov Charney never sexualized, propositioned or made any sexual advances of any nature whatsoever towards Mary Nelson. The marketing materials, sexual speech and much of the conduct about which Nelson complains are protected under the First Amendment’s guarantee of free speech and cannot form the basis for any claim. The remainder of the speech and conduct about which Nelson complains was not directed at her or other women because of their gender and therefore was not actionable.’”
The settlement agreement contemplated that following defendants’ receipt of the arbitrator’s order, and concurrent with receipt from plaintiff of a fully executed request for dismissal with prejudice—no later than February 7, 2008—defendants would deliver the $1.3 million to plaintiff.
Finally, the parties agreed American Apparel, Inc. would be allowed to issue a press release stating an arbitrator had ruled in defendants’ favor. Paragraph 7(e) of the settlement agreement provided: “Following issuance of the Arbitrator’s decision and order, American Apparel may issue the following press release:
‘American Apparel and its CEO Dov Charney announced today that an Arbitrator has ruled in their favor in the highly-publicized action brought by former sales manager Mary Nelson. The Arbitrator ruled that the marketing materials, sexual speech and much of the conduct about which Nelson complained are protected under the First Amendment’s guarantee of free speech and could not form the basis for any claim. The Arbitrator further ruled that Dov Charney never sexualized, propositioned or made any sexual advances of any nature whatsoever towards Mary Nelson, and the remainder of the speech and conduct about which Nelson complained was not directed at her or other women because of their gender, and therefore was not actionable. The decision puts an end to the sexual harassment claims against Charney and the Company. ‘I am pleased that we have been able to bring clarity to the role of the First Amendment in the American workplace,’ Charney stated.”
 Defendants, without admitting liability, agreed to compensate plaintiff as follows: “In consideration of the covenants undertaken and releases given herein by Plaintiff, specifically including but not limited to, the Arbitrator’s Award referenced in Paragraph 7 below, the Company shall provide Plaintiff with the following consideration in full and final settlement of any and all matters of any kind or nature which were alleged by, or could have been alleged by, Plaintiff against the Company and/or any of the Releasees identified in Paragraph 4 below: following receipt by the Company of the decision and order of the Arbitrator pursuant to Paragraph 7, below, and concurrent with the receipt by counsel for the Company of a fully executed Request for Dismissal with prejudice, as set forth in Paragraph 3, below (and in no event later than February 7, 2008), the Company will pay the total amount of One Million Three Hundred Thousand Dollars ($1,300,000.00), for alleged emotional distress damages . . . .”
Apparently, $1.3 million can buy you a fair amount of free speech, but it didn't really turn out to be so free.
Next week: we'll be reviewing 24 cases that came down in the last quarter and haven't yet been discussed here.