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Romney v. Franciscan Medical Group

Court of Appeals of Washington, Division 1

February 17, 2015

Michael Romney et al. , Individually and on Behalf of All Others Similarly Situated , Respondents ,
v.
Franciscan Medical Group et al. , Appellants

Reconsideration denied March 17, 2015.

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[Copyrighted Material Omitted]

Page 34

Appeal from King County Superior Court. Docket No: 13-2-38634-8. Judge signing: Honorable Julia L Garratt. Judgment or order under review. Date filed: 01/24/2014.

Michael F. Madden (of Bennett Bigelow & Leedom PS ) (Karen R. Glickstein of Polsinelli PC, of counsel), for appellants.

Scott C.G. Blankenship and Paul S. Woods (of The Blankenship Law Firm PS ), for respondents.

Authored by Michael J. Trickey. Concurring: Ann Schindler, Ronald Cox.

OPINION

[186 Wn.App. 733] Michael J. Trickey, J.

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¶ 1 Washington has a strong public policy favoring arbitration. Because of that clear policy, an employer-employee arbitration agreement will be upheld even if certain provisions of the agreement are substantively unconscionable so long as those provisions are severable.

¶ 2 The arbitration agreement allows plaintiff-employees to seek damages claimed as well as any attorney fees and costs " as required by law." The arbitration agreement at issue here is neither procedurally nor substantively unconscionable.

¶ 3 The employees' assertion that the agreement is substantively unconscionable because other sections of the employment contract permit the employer to seek limited judicial relief without affording the employees that same option is not well taken. Even assuming the provisions the employees assert were unconscionable, those provisions are severable and do not impact the underlying agreement to arbitrate.

¶ 4 We reverse the trial court's determination that the arbitration agreement was invalid and remand to compel arbitration.

FACTS

¶ 5 Plaintiffs/respondents Michael Romney, MD, Faron Bauer, MD, and Kristen Childress, ARNP,[1] are former [186 Wn.App. 734] employees of defendant/appellant Franciscan Medical Group (FMG). Each entered into an employment contract with FMG that included agreements to arbitrate all employment related disputes between the parties. The employees brought suit against FMG for damages, statutory penalties, and equitable relief for wage violations on behalf of themselves and the class of physicians, medical assistants, and nurse practitioners. Romney and Bauer brought individual claims for being fired in retaliation for whistle-blowing and for losing their hospital privileges.

¶ 6 Romney, Bauer, and Childress filed suit in King County Superior Court and at the same time requested the court to find the arbitration agreement signed by each of the parties to be unconscionable. FMG moved to compel arbitration. The trial court found the arbitration addendum unconscionable, invalidated it, and denied FMG's motion to compel arbitration. FMG timely appeals.

ANALYSIS

¶ 7 The arbitration agreement provides that the Federal Arbitration Act (FAA), 9 U.S.C. § § 1-16, governs. Section 2 of the FAA provides that written arbitration agreements " shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." The effect of this section is to create a body of substantive federal law on

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arbitration that state and federal courts must apply to arbitration agreements that fall under the FAA's coverage. Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987). Courts must indulge every presumption in favor of arbitration under the FAA. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), superseded on other grounds by 9 U.S.C. § 16(b)(1).[2]

[186 Wn.App. 735] ¶ 8 Washington has a similar strong policy favoring arbitration. RCW 7.04A.060; Adler v. Fred Lind Manor, 153 Wn.2d 331, 342, 103 P.3d 773 (2004). This policy does not, however, lessen this court's responsibility to determine whether the arbitration contract is valid. Hill v. Garda CL Nw., Inc., 179 Wn.2d 47, 53, 308 P.3d 635 (2013). The agreement to arbitrate is a contract, the validity of which courts review absent a clear agreement to not do so. Hill, 179 Wn.2d at 53. Whether or not a contract is unconscionable is a preliminary question for judicial consideration.

¶ 9 This court reviews de novo a trial court's decision to compel or deny arbitration. Gandee v. LDL Freedom Enters., Inc., 176 Wn.2d 598, 602, 293 P.3d 1197 (2013); Satomi Owners Ass'n v. Satomi, LLC, 167 Wn.2d 781, 797, 225 P.3d 213 (2009). The burden of demonstrating that an arbitration agreement is not enforceable is on the party opposing the arbitration. Zuver v. Airtouch Commc'ns, Inc., 153 Wn.2d 293, 302, 103 P.3d 753 (2004).

¶ 10 Washington recognizes two types of unconscionability for invalidating arbitration agreements, procedural and substantive. McKee v. AT& T Corp. 164 Wn.2d 372, 396, 191 P.3d 845 (2008). Procedural unconscionability applies to impropriety during the formation of the contract, while substantive unconscionability applies to cases where a term in the contract is alleged to be one-sided or overly harsh. Nelson v. McGoldrick, 127 Wn.2d 124, 131, 896 P.2d 1258 (1995). Either is sufficient to void the agreement. Hill, 179 Wn.2d at 55.

Procedural Unconscionability

¶ 11 To determine whether an agreement is procedurally unconscionable, we examine the circumstances surrounding the transaction, including (1) " 'the manner in [186 Wn.App. 736] which the contract was entered,'" (2) " 'whether each party had a reasonable opportunity to understand the terms of the contract,'" and (3) " 'whether the important terms were hidden in a maze of fine print,'" to determine whether a party lacked a meaningful choice. Nelson, 127 Wn.2d at 131 (alterations and internal quotation marks omitted) (quoting Schroeder v. Fageol Motors, Inc., 86 Wn.2d 256, 260, 544 P.2d 20 (1975)).

¶ 12 The employees argue that the agreement is procedurally unconscionable because they had no meaningful choice in negotiating and signing the contract. Romney's declaration asserts that he was never informed that he could negotiate any terms of either the employment agreement or the arbitration addendum. In fact, he says that he was " strong-armed" because he was told that he could not work without a contract.[3] Bauer's declaration states that he knew of another physician who refused to sign the employment agreement and was no longer employed by FMG. Childress's declaration asserts that she attempted to negotiate both the wages and noncompete clauses, but was informed that the contract was not modifiable. FMG presented each employee with the contract and asserted that it " is what it is." [4]

¶ 13 A contract is " procedurally unconscionable" when a party with unequal bargaining power lacks a meaningful opportunity to bargain, thus making the end result an adhesion ...


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