Beynon v. Garden Grove Medical Group

• Decision Date: 04 January 1980
• Citation: 100 Cal.App.3d 698,161 Cal.Rptr. 146
• Court: California Court of Appeals Court of Appeals
• Parties: Joann BEYNON, Plaintiff and Appellant, v. GARDEN GROVE MEDICAL GROUP, Defendants and Respondents. Civ. 20562.

Page 146

161 Cal.Rptr. 146

100 Cal.App.3d 698

Joann BEYNON, Plaintiff and Appellant, v. GARDEN GROVE MEDICAL GROUP, Defendants and Respondents.

Civ. 20562.

Court of Appeal, Fourth District, Division 2, California.

Jan. 4, 1980.

Lintz, Williams & Rothberg, Van Nuys, and Leonard Sacks, Encino, for plaintiff and appellant

Bonne, Jones, Bridges, Mueller & O'Keefe and Jerrie S. Weiss, Santa Ana, for defendants and respondents.

OPINION

TAMURA, Associate Justice.

Plaintiff appeals from an order denying her petition to confirm a medical malpractice arbitration award against defendants Garden Grove Medical Group and Edward Vas Nunes, M.D. Plaintiff's claim arose out of medical treatment rendered by defendants pursuant to a group prepaid health care plan. The court upheld defendants' contention that the award was not binding because they had exercised the right reserved to them by the terms of the master policy to reject the arbitrators' decision and to require the dispute to be resubmitted to another arbitration panel of three doctors. The central issue on this appeal concerns the enforceability of the provisions of the master policy giving the health care provider the right to reject an arbitration decision without cause and to require resubmission of the controversy to a second arbitration panel.

The pertinent facts are not in dispute:

When plaintiff first went to work for her employer in February 1974, she was told that a health care service plan provided by the California Medical Group Health Plan, Inc. was available to employees of the firm and was given a pamphlet describing the plan. After reading the pamphlet she signed an enrollment card by which she applied for membership in the plan "as described in the master agreement and policy," effective as of May 1, 1974. Plaintiff received a welcoming letter and a membership card but was never provided with a copy of the master policy.

During late July or early August 1975, plaintiff received medical care and treatment from defendants pursuant to the health plan. A dispute arose over the quality of the treatment provided by defendants. Plaintiff's attorney notified defendants of her intention to sue them for medical malpractice and requested that if it be claimed that the dispute must be arbitrated to so inform him. Defendants' attorney responded that "Article XVI" of the master policy made arbitration the exclusive remedy for resolving all disputes arising under the agreement. Plaintiff's attorney requested and was provided a copy of the master policy and a copy of plaintiff's enrollment card. Meanwhile, plaintiff had filed her medical malpractice action against defendants. Following receipt of a copy of the master contract, plaintiff's counsel informed defendants' counsel that plaintiff had selected an arbitrator and requested defendants to do the same. Defendants nevertheless filed their answer together with a petition to compel arbitration. The petition was granted without opposition and the court made its order directing the parties to arbitrate the controversy "in accordance with the provisions of the agreement dated May 1, 1974." ¹

The parties proceeded to arbitration before a panel of attorneys composed of one selected by each side and a neutral arbitrator selected by the two. Following some four days of hearings, the arbitrators rendered an unanimous decision finding that defendant Vas Nunes performed surgery on plaintiff in a negligent manner and that as a proximate result of the negligence plaintiff sustained damages in the sum of $60,000. An award was made in that amount.

Within 30 days after the arbitration award, defendants gave written notice to plaintiff and to the arbitrators that pursuant to paragraph B of article XVI (hereafter, paragraph B) of the master policy, they elected to reject the arbitrators' decision and to require resubmission of the dispute to a second panel of arbitrators composed of three doctors. ² Plaintiff countered by filing a petition for confirmation of the award which defendants opposed on the basis of their rejection of the award under the terms of paragraph B. In a responsive declaration, plaintiff stated that she had never signed an agreement containing paragraph B, had never seen the master policy, and was not aware of the fact that paragraph B was a part of it. Plaintiff maintained that paragraph B was unenforceable because she was never made aware of its terms and on the further ground that its provisions were invalid as being in contravention of public policy. The court denied the petition and plaintiff appeals. ³

Plaintiff contends, as she did below, that paragraph B is unenforceable because she never assented to its terms and because its provisions are void as against public policy. Plaintiff further contends that paragraph B is severable from those provisions of article XVI pursuant to which the arbitration proceedings were held and that the award should therefore have been confirmed. For reasons expressed below, we have concluded that plaintiff's contentions are sound and that the order denying confirmation of the award should be reversed.

I

There is a strong public policy in this state favoring arbitration as a means of resolving disputes, including disputes over medical malpractice claims, because it is expeditious, inexpensive, and relieves overburdened courts. ⁴ (Madden v. Kaiser Foundation Hospitals, 17 Cal.3d 699, 706-707, 131 Cal.Rptr. 882, 552 P.2d 1178; Hawkins v. Superior Court, 89 Cal.App.3d 413, 416, 152 Cal.Rptr. 491; see Wheeler v. St. Joseph Hospital, 63 Cal.App.3d 345, 355-356, 133 Cal.Rptr. 775.) However, arbitration being consensual in nature (Code Civ.Proc., § 1281.2; United Steelworkers v. Warrior & G. Nav. Co., 363 U.S. 574, 582-583, 80 S.Ct. 1347, 4 L.Ed.2d 1409; Freeman v. State Farm Mut. Auto. Ins. Co., 14 Cal.3d 473, 479, 121 Cal.Rptr. 477, 535 P.2d 341), in order to be enforceable an agreement to arbitrate must have been openly and fairly entered into by the parties (Wheeler v. St. Joseph Hospital, supra, 63 Cal.3d 345, 356, 133 Cal.Rptr. 775; Windsor Mills, Inc. v. Collins & Aikman Corp., 25 Cal.App.3d 987, 993-994, 101 Cal.Rptr. 347; Player v. Geo. M. Brewster & Son, Inc., 18 Cal.App.3d 526, 534, 96 Cal.Rptr. 149.)

Plaintiff does not deny the existence of an agreement to arbitrate but contends that under adhesion contract principles the provisions of paragraph B are unenforceable because they were never called to her attention when she enrolled in the plan and they unexpectedly and unreasonably limit the obligations of the health plan and health care provider. We agree.

Where a contract is adhesive, courts will not enforce a provision which limits the liabilities and duties of the stronger party unless such provisions are clear and conspicuous and will not operate to defeat the reasonable expectations of the weaker party. (Madden v. Kaiser Foundation Hospitals, supra, 17 Cal.3d 699, 710, 131 Cal.Rptr. 882, 552 P.2d 1178; Steven v. Fidelity and Casualty Co., 58 Cal.2d 862, 878-879, 27 Cal.Rptr. 172; Wheeler v. St. Joseph Hospital, supra, 63 Cal.App.3d 345, 356-357, 133 Cal.Rptr. 775.) The term "adhesion contract" normally refers to a contract drafted and imposed by a party enjoying superior bargaining strength and offered to the weaker party, usually consumers of goods or services, on essentially a "take it or leave it" basis without opportunity for individual bargaining. (Smith v. Westland Life Ins. Co., 15 Cal.3d 111, 122 (fn. 12), 123 Cal.Rptr. 649, 539 P.2d 433; Steven v. Fidelity and Casualty Co., supra, 58 Cal.2d 862, 882, 27 Cal.Rptr. 172; Wheeler v. St. Joseph Hospital, supra, 63 Cal.App.3d 345, 356, 133 Cal.Rptr. 775.)

In the case at bench, there was no evidence that the agreement was negotiated by parties having a parity of bargaining strength or that plaintiff had a realistic opportunity to bargain or to seek a more favorable contract. (See Jones v. Crown Life Ins. Co., 86 Cal.App.3d 630, 638, 150 Cal.Rptr. 375.) The provisions of paragraph B were never called to plaintiff's attention when she enrolled in the plan. The brochure prepared and distributed by the health plan, a copy of which was furnished plaintiff before she decided to enroll, made only the following brief reference to arbitration: "Disputes involving matters pertaining to the prepaid plans and care received or refused must be submitted to arbitration in accordance with the Agreement." There was no reference to the provisions of paragraph B, if indeed it was then a part of the master policy. As plaintiff correctly points out, the record does not contain a copy of the master policy in force in 1974 when plaintiff enrolled. Defendants base their right to reject the arbitration award and to require rearbitration on the basis of paragraph B of the master policy entered into on July 23, 1975; they made no showing that paragraph B or its equivalent was a part of the master policy in force when plaintiff enrolled in 1974.

That the provisions of paragraph B unreasonably limit the obligations of the health plan and health care provider and defeat the reasonable expectations of one enrolling in the plan is manifest. The term arbitration normally imports a dispute resolution procedure which is speedy, economical and "bears equally" on the parties. (Madden v. Kaiser Foundation Hospitals, supra, 17 Cal.3d 699, 711, 131 Cal.Rptr. 882, 552 P.2d 1178.) The provisions of paragraph B, however, are weighted in favor of the health plan and provider of services and against members and can render arbitration an expensive and protracted proceeding. By granting to only the health plan or health care provider the unilateral right to reject an arbitration award without cause and to require rearbitration, paragraph B enables the health plan and health care provider to transform arbitration into virtually a "heads I win, tails you lose" proposition. Furthermore, inasmuch as the contract requires each side to bear...