Livingston v. METROPOLITAN PEDIATRICS, LLC, 060100470

Decision Date03 March 2010
Docket NumberA134765.,060100470
Citation234 Or. App. 137,227 P.3d 796
PartiesJoseph S. LIVINGSTON, Plaintiff-Respondent, v. METROPOLITAN PEDIATRICS, LLC; Heather M. Moore, M.D.; Dean A. Moshofsky, M.D.; Karen H. Lickteig, M.D.; Gwynneth G. Neace, D.O.; Richard Barsotti, M.D.; Gale A. Rydell, M.D.; Catherine Thomas, PNP; Karen Heichelheim; Mary Kay Brady; and Nicole Huyck, aka Nichole Powers, Defendants-Appellants.
CourtOregon Court of Appeals

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John Dudrey argued the cause for appellants. With him on the briefs were Michael D. Williams and Williams Frederickson, LLC.

Mark G. McDougal argued the cause for respondent. With him on the brief was Gregory Kafoury.

Before LANDAU, Presiding Judge, and SCHUMAN, Judge, and ORTEGA, Judge.

ORTEGA, J.

Plaintiff brought common-law claims against defendants for wrongful discharge, breach of contract, intentional infliction of emotional distress, and intentional interference with economic relations, and brought statutory claims of employment discrimination, ORS 659A.230 (whistleblowing),1 and blacklisting, ORS 659.805.2 This is an interlocutory appeal of an order denying defendants' motion to abate plaintiff's claims and compel arbitration pursuant to an arbitration clause in plaintiff's employment agreement. ORS 36.730(1)(a). The trial court ruled that the arbitration clause is unenforceable because it is unconscionable. On appeal, defendants contend that the trial court's ruling was in error, and we agree. We also reject the other grounds for avoiding the arbitration clause that plaintiff asserts as alternative bases for affirming the trial court's ruling. Accordingly, we reverse and remand.

For purposes of the issues raised on appeal, we draw the underlying facts from plaintiff's complaint and take his allegations as true. Plaintiff is a pediatrician, with masters' degrees in computer science and public health. Defendant Metropolitan Pediatrics, LLC (MP), owns four pediatric clinics in the Portland metropolitan area. The individual named defendants are doctor members and employees of MP. After completing clinical training, plaintiff moved to Oregon to work for MP as a pediatrician on physician-partner track, at an annual salary of $105,000 plus benefits.

A few months after plaintiff arrived, as a result of a routine inspection of MP's facilities by the "Vaccines for Children" program, MP learned that there was a problem with its storage of vaccines, with the possible result that some of those that it had administered were ineffective. Vaccines for Children advised MP to investigate and to take appropriate corrective action, including determining the need for revaccination. Initially, MP decided not to inform patients of the problem. It later decided to offer free revaccination to patients who had been vaccinated within the last eight months. Plaintiff expressed strong and persistent disagreement with MP's investigation and with the individual defendants concerning the handling of the risks of having administered ineffective vaccines. When MP did not address plaintiff's concerns to his satisfaction, plaintiff expressed his intention to notify his own patients, but MP prohibited him from doing so. He also contacted government authorities and learned that defendants had submitted falsified documents concerning its revaccination program. MP later extended its revaccination program to patients who had received certain vaccines within two years of the discovery of the storage problem.

Despite positive feedback from his patients concerning his performance as a physician, MP admonished plaintiff for his conduct relating to the vaccines, and MP and the individual defendants began a pattern of abuse and discrimination. MP eventually terminated plaintiff's employment in retaliation for his conduct relating to revaccination. Defendants also made defamatory and untrue statements about him to several potential employers.

Plaintiff filed a complaint with the Oregon Bureau of Labor and Industries (BOLI). Defendant MP participated in the BOLI proceedings by responding to the complaint but did not seek to compel or enforce arbitration. Thereafter, BOLI investigated plaintiff's complaint, and plaintiff participated in discovery. The BOLI proceeding culminated in the issuance of a "right to sue" letter.

Plaintiff later filed the complaint in this proceeding, alleging that defendants' conduct constituted wrongful discharge, breach of contract, intentional infliction of emotional distress, and intentional interference with economic relations, and that it violated statutes prohibiting employment discrimination, and blacklisting. Plaintiff sought damages, injunctive relief, penalties, and attorney fees.

Plaintiff's employment agreement contained an arbitration clause that required arbitration of "any controversy, dispute or disagreement arising out of or relating to this Agreement, or the breach thereof." Defendants filed a petition to compel arbitration of plaintiff's claims pursuant to ORS 36.625(1).3 Plaintiff raised a number of challenges to the enforceability of the arbitration clause, contending that (1) by participating in proceedings before BOLI, defendants are estopped from asserting or waived the right to assert that the claims are subject to arbitration; (2) claims against the individual, nonsignatory defendants are not subject to arbitration; and (3) several provisions of the arbitration clause render it unconscionable.

The trial court rejected defendants' petition to arbitrate, accepting plaintiff's arguments about unconscionability. In a letter opinion, the court stated:

"My conclusion is that several features of the subject arbitration provisions render the agreement to arbitrate unenforceable as a matter of law. These features include 1) a fee shifting provision imposing attorney fees and costs on plaintiff should he not prevail on his blacklisting claim, 2) imposition of excessive arbitration fees on plaintiff, 3) ambiguity about what AAA Rules would apply (Commercial or Employment) to this controversy, and 4) a confidentiality requirement which also raises serious public policy concerns.
"Under these circumstances, the Court need not determine whether each separate feature of the agreement renders the arbitration provisions unenforceable. Rather, the above features, in combination, render the arbitration provisions unenforceable. The Court concludes that the arbitration agreement is void as against public policy."

In this interlocutory appeal, defendants challenge the bases for the trial court's ruling. They also contend that plaintiff's other grounds asserted in the trial court in avoidance of the arbitration clause are without merit. We agree with defendants that the arbitration clause is enforceable and therefore reverse and remand.

The parties agree that the case is subject to the Uniform Arbitration Act (UAA), ORS 36.600 to 36.740. ORS 36.620 provides, in part:

"(1) An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract.
"(2) Subject to ORS 36.625(8), the court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate.
"(3) An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled."

Because they are potentially dispositive, we first address each of plaintiff's alternative grounds for affirmance that were raised and argued below but not addressed by the trial court. Outdoor Media Dimensions Inc. v. State of Oregon, 331 Or. 634, 660, 20 P.3d 180 (2001). Those grounds are (1) that defendants are estopped from or have waived enforcement of the arbitration clause; (2) that the right to compel arbitration, if any, did not survive the termination of plaintiff's employment; (3) that plaintiff's claims asserting intentional torts are not subject to arbitration; (4) that plaintiff's statutory employment discrimination claim is not subject to arbitration; and (5) that his claims against the individual defendants are not subject to arbitration. We conclude that the first issue is for an arbitrator to decide, and reject each of plaintiff's other arguments in turn.

First, plaintiff contends that the trial court's order should be affirmed because, by their participation in the BOLI proceeding, defendants either are estopped from or have waived enforcement of the arbitration clause.4 Defendants contend that both estoppel and waiver present "conditions precedent" to arbitrability that must be addressed by the arbitrator rather than the court, pursuant to ORS 36.620(3).

That section provides that "an arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled." The statute, enacted in 2003, Or. Laws 2003, ch. 598, § 6, has never been construed. However, the Revised Uniform Arbitration Act (RUAA) on which Oregon's UAA is based, contains an identical provision. RUAA § 6(c). Commentary to Section 6 of the RUAA states that, "in the absence of an agreement to the contrary, issues of * * * procedural arbitrability, i.e., whether prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an obligation to arbitrate have been met, are for the arbitrators to decide." Id. § 6 comment 2, 7 ULA 13 (Supp 2002) (emphasis added).

Interestingly, estoppel is more commonly regarded as a means of avoidance of contractual conditions or obligations, rather than what contract law customarily describes as a "condition precedent." See, e.g., Day-Towne v. Progressive Halcyon Ins. Co., 214 Or.App. 372, 381-82, 164 P.3d 1205 (2007) (addressing when estoppel may be invoked in the context of insurance); Wright v. State Farm Mutual Automobile...

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