Judge Lynne M. Hobbs, Case Number: 24STCV03041, Date: 2024-06-28 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 24STCV03041, Date: 2024-06-28 Tentative Ruling

Case Number: 24STCV03041 Hearing Date: June 28, 2024 Dept: 61

JUSTIN KANE M.D., AN INDIVIDUAL vs SOUTHERN CALIFORNIA PERMANENTE MEDICAL GROUP

TENTATIVE

Defendant Southern California Permanente Medical Group’s Motion to Compel Arbitration is GRANTED. The confidentiality provision and default discovery limitations are unconscionable and severed from the contract.

Defendant to provide notice.

DISCUSSION

On petition of a party to an arbitration agreement to arbitrate a controversy, a court must order the petitioner and respondent to arbitrate the controversy if it determines the arbitration agreement exists, unless (1) the petitioner has waived its right to arbitrate; (2) grounds exist for the revocation of the agreement; or (3) “[a] party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2.)

“[T]he party moving to compel arbitration bears the burden of establishing the existence of a valid agreement to arbitrate, and the party opposing arbitration bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. The role of the trial court is to sit as a trier of fact, weighing any affidavits, declarations, and other documentary evidence, together with oral testimony received at the court's discretion, to reach a determination on the issue of arbitrability.” (Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754, 758.)

Defendant Southern California Permanente Medical Group (Defendant) moves to compel arbitration of Plaintiff Justin Kane, M.D.’s (Plaintiff) claims for disability discrimination, retaliation, and intentional infliction of emotional distress. Defendant cites a Dispute Resolution Procedure (DRP) electronically signed by Plaintiff in March 2013. (Motion Exh. B.) The DRP applies to “any dispute involving a Physician and SCPMG that would otherwise be cognizable in a court of law, including, without limitation, any dispute related to a Physician’s relationship with SCPMG or any alleged termination of that relationship, whether based on contract, tort, state, or federal statute, ordinance or regulation.” (Ibid.)

Plaintiff opposes the agreement on the grounds that it is unconscionable. “Unconscionability requires a showing of both procedural unconscionability and substantive unconscionability.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) Arbitration contracts presented to employees on a take-it-or-leave-it basis are at least minimally procedurally unconscionable. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 113.) The agreement here is one of adhesion presented to Plaintiff by Defendant.

Plaintiff identifies three substantively unconscionable provisions. First, Plaintiff contends that any arbitration decision is subject to de novo review by an Area Appeals Committee made up of Kaiser Equity Partners who are not a neutral tribunal. (Opposition at pp. 5–10.) Plaintiff also argues that the arbitration agreement contains a confidentiality provision not based on a legitimate commercial need. (Opposition at pp. 10–13.) Plaintiff finally argues that the agreement’s discovery provisions limit Plaintiff’s ability to vindicate statutory claims, particularly in relation to the complexity of the case. (Opposition at pp. 14–17.)

Plaintiff’s argument in relation to the Area Appeals Committee (AAC) is unpersuasive, because the DRP is reasonably interpreted to exclude arbitration proceedings from AAC jurisdiction. The arbitration section states: “The [arbitrator’s] award is final and binding on the parties, and may be vacated or modified only on the grounds specified in the U.S. Arbitration Act or applicable law.” (Motion Exh. B at p. 7.) The DRP does not mention the AAC, and the AAC is rather mentioned in the Partnership Agreement Rules and Regulations, where it states it “may hear a dispute only after all prior steps required by the DRP have been completed and at least one of the parties requests hearing by the Committee.” (Motion Exh. E at p. 1-13.) The AAC does not mention arbitration, and is rather applicable to the alternative dispute resolutions procedures laid out in the sections preceding the arbitration provision, which explicitly mention the AAC. (Motion Exh. K at pp. 34–40.) The arbitration provision mentions the AAC only as a non-essential prerequisite to arbitration, not as an appeal from arbitration.

The confidentiality provision, however, is unconscionable. “[A] confidentiality provision in an arbitration agreement is not per se unconscionable when it is based on a legitimate commercial need (such as to protect trade secrets or proprietary information).” (Hasty v. American Automobile Assn. etc. (2023) 98 Cal.App.5th 1041, 1061–1062.) The provision here states, “No part of the procedures shall be open to the public or the media. All evidence discovered or submitted at the hearing is confidential and may not be disclosed, except pursuant to court order.” (Motion Exh. B at p. 7.) Defendant here argues that the provision is related to the preservation of patient privacy. (Reply at pp. 5–6.) They do not explain why the preservation of patient privacy requires that all evidence obtained and presented in employment arbitrations be confidential. If this were the interest to be protected, Defendant have drafted a provision stating that “Both parties agree that in the course of any arbitration proceeding all necessary steps will be taken to protect from public disclosure such [private patient information].” (See Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1242.) Because the confidentiality provision is not commensurate with the interest that Defendant has identified, the provision is unconscionable.

As to the arbitration agreement’s discovery provisions, the agreement permits 25 interrogatories, 25 document requests, four seven-hour days of deposition, depositions of any experts designated by the other party, subpoenas to third parties, independent physical or mental examinations, and further discovery as “approved by the arbitrator upon a showing of good cause by the party seeking such discovery,” with the arbitrator weighing “the delay in resolving the dispute, the weight of any evidence which might be reasonably expected to be discovered, alternative and less costly methods of securing the sought-after information not yet utilized, and the hardship of production.” (Motion Exh. B at p. 7.)

This provision is not per se unconscionable, as the default discovery provisions are expanded with an authorization to the arbitrator to permit more discovery upon a mere showing of good cause. “We assume that the arbitrator will operate in a reasonable manner in conformity with the law.” (Dotson v. Amgen, Inc. (2010) 181 Cal.App.4th 975, 984; see Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 184 [upholding default discovery provisions in an arbitration agreement with expansion permitted for “good cause”].)

However, Plaintiff has presented evidence, not disputed by Defendant in reply, that the needs of his case will necessarily and vastly exceed the scope of the default provisions at issue. Plaintiff estimates that more than 30 interrogatories, 75 requests for production, and more than 15 witness depositions to complete his claims, and the nature of this discovery is explained by Plaintiff’s counsel. (Ranen Decl. ¶¶ 2–6.) This evidence is relevant because, evaluating the validity of discovery limitations, courts consider “whether the plaintiffs have demonstrated that the discovery limitations will prevent them from adequately arbitrating their statutory claims.” (Davis v. Kozak (2020) 53 Cal.App.5th 897, 911.) Moreover, even if Plaintiff may exceed the default discovery provisions upon a showing of good cause, such a provision will not render a discovery limitation valid if the amount of discovery required in a given case greatly exceeds the default amount provided. (See Murrey v. Superior Court (2023) 87 Cal.App.5th 1223, 1249–1250.) “While we agree . . . that we must assume an arbitrator will act in a reasonable manner, a reasonable arbitrator would feel constrained under the terms of the . . . [arbitration agreement] to expand discovery to the extent necessary to vindicate . . . [the plaintiff’s] statutory rights.” (Baxter v. Genworth North America Corp. (2017) 16 Cal.App.5th 713, 730 [addressing default discovery limitations with expansion permitted for “good and sufficient cause”].) Accordingly, the default discovery provisions are unconscionable as well.

These provisions, however, are severable.

A trial court has the discretion to refuse to enforce an agreement as a whole if it is permeated by the unconscionability. The overarching inquiry is whether the interests of justice would be furthered by severance. If the central purpose of a contractual provision, such as an arbitration agreement, is tainted with illegality, then the provision as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contractual provision, and can be severed or restricted from the rest, then severance is appropriate.

(Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 90, internal quotation marks, citations, and alterations omitted.) “When an arbitration agreement contains multiple unconscionable provisions, such multiple defects indicate a systematic effort to impose arbitration on an employee not simply as an alternative to litigation, but as an inferior forum that works to the employer's advantage.” (Ibid, internal quotation marks and alterations omitted.)

The arbitration agreement here contains a severability clause. (Motion Exh. B at p. 7.) Nor do the provisions identified above indicate a systematic effort to impose an inferior forum upon an employee. The discovery limitations at issue are not per se unconscionable, but are made so by Plaintiff’s presentation of evidence that his case is “extraordinarily complex.” (Opposition at p. 13.) And the confidentiality provision, while not supported by legitimate commercial need, applies only to the disclosure of evidence discovered or submitted at the arbitration hearing. It does not purport to prohibit disclosure of the nature of Plaintiff’s claims, the existence of the arbitration, the ultimate findings of the arbitrator, or information already in the parties’ possession without the benefit of discovery. It is therefore not so broad as the confidentiality agreements cited by Plaintiff as examples of unconscionable provisions. (See Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1048 [invalidating confidentiality provision requiring “all aspects of the arbitration shall be maintained by the parties and the arbitrators in strict confidence”]; Hasty v. American Automobile Assn. etc. (2023) 98 Cal.App.5th 1041, 1061 [invalidating clause that required “confidential arbitration” and left the scope of that confidentiality to be decided by the arbitrator].)

The motion is therefore GRANTED. The invalid confidentiality provision and default discovery limitations are severed.