Melez v. Kaiser Found. Hosps., Inc. – March 2015 (Summary)

ARBITRATION

Melez v. Kaiser Found. Hosps., Inc., No. 2:14-cv-08772-CAS (VBKx) (C.D. Cal. Mar. 2, 2015)

The United States District Court for the Central District of California granted a motion to compel arbitration filed by a hospital system in a wrongful termination suit brought by a former physician employee.

The physician began working for the hospital in 1991. After over a decade of working for the hospital, the physician was asked to sign a Dispute Resolution Procedure (DRP) agreement, which stated that any dispute regarding wrongful termination, discrimination, harassment or retaliation would be subject to binding arbitration. Though the physician objected to the terms of the DRP, she eventually signed it.

When the physician was terminated by the hospital, she filed claims including wrongful termination, age discrimination, retaliation, and harassment. The hospital then filed a motion to compel arbitration under the American Arbitration Association (AAA) rules. The physician opposed arbitration, arguing that the DRP agreement was unconscionable and therefore unenforceable.

In response to the argument that the DRP agreement was oppressive (the physician had to sign it if she wanted to continue her employment), the court recognized that the physician was highly educated and could seek employment elsewhere. Thus, the court held that the DRP agreement was “adhesive,” but was not “highly oppressive under the totality of the circumstances.”

The court also looked at whether the hospital’s failure to provide the physician with a copy of the AAA rules referenced in the DRP, and the fact that the AAA rules had been amended after she signed them, rendered the DRP agreement unconscionable. Ultimately, the court concluded that while the agreement was “procedurally unconscionable” it was not “highly so.”

The physician also argued that the DRP agreement was substantively unconscionable, in part because of the limitation on discovery. The court found that the physician had not presented evidence that the limitations on discovery would prevent her from vindicating her statutory rights. Therefore, the agreement was not substantively unconscionable.

The court reached the same conclusion with respect to the carve-out terms in the DRP agreement. Finding that the carve-out provisions were mutual, allowing certain actions by either party, the court ruled that the DRP agreement was not substantively unconscionable. Thus, the court found that the DRP agreement was not sufficiently procedurally or substantively unconscionable to overcome “liberal federal policy favoring arbitration agreements.”