Romney v. Franciscan Med. Grp.

• Decision Date: 10 July 2017
• Docket Number: No. 74806-8-I,74806-8-I
• Citation: 399 P.3d 1220,199 Wash.App. 589
• Parties: Cindius ROMNEY as Personal Representative FOR the ESTATE OF Michael ROMNEY; Faron Bauer ; and Kristen Childress, individually and on behalf of all others similarly situated, Appellants, v. FRANCISCAN MEDICAL GROUP, a Washington corporation; Franciscan Health System, a Washington corporation; Franciscan Health Ventures, a Washington corporation; Franciscan Northwest Physicians Health Network, LLC, a Washington corporation; and Catholic Health Initiatives, a Colorado corporation, Respondents.
• Court: Washington Court of Appeals

199 Wash.App. 589

399 P.3d 1220

Cindius ROMNEY as Personal Representative FOR the ESTATE OF Michael ROMNEY; Faron Bauer ; and Kristen Childress, individually and on behalf of all others similarly situated, Appellants,

v.FRANCISCAN MEDICAL GROUP, a Washington corporation; Franciscan Health System, a Washington corporation; Franciscan Health Ventures, a Washington corporation; Franciscan Northwest Physicians Health Network, LLC, a Washington corporation; and Catholic Health Initiatives, a Colorado corporation, Respondents.

No. 74806-8-I

Court of Appeals of Washington, Division 1.

FILED: July 10, 2017

Scott Crispin Greco Blankenship, Richard Goldsworthy, The Blankenship Law Firm, P.S., 1000 2nd Ave., Ste. 3250, Seattle, WA, 98104-1094, for Appellants.

Michael F. Madden, Bennett Bigelow & Leedom PS, 601 Union St., Ste. 1500, Seattle, WA, 98101-1363, Adam Merrill, Polsinelli PC, One East Washington St., Suite 1200, Phoenix, AZ, 85004, Michele Gehrke, Polsinelli PC, Three Embarcadero Center, Ste. 1350, San Francisco, CA, 98411, for Respondents.

Trickey, A.C.J.¶1 Michael Romney and several other medical professionals (collectively Romney)¹ sued their former employer, Franciscan Medical Group (FMG), individually and on behalf of a putative class. In the first appeal in this case, Romney argued that the arbitration agreements the employees had signed were unconscionable. We disagreed. On remand, the superior court granted FMG's motion to compel individual arbitration rather than class arbitration.

¶2 Romney argues in this second appeal that FMG waived its right to compel individual arbitration. Because FMG's conduct in the superior court and during the first appeal was inconsistent with a right to compel individual arbitration, and the delay in asserting the right prejudiced Romney, we agree. Accordingly, we reverse.

FACTS

¶3 We summarized the facts preceding the first appeal in Romney v. Franciscan Medical Group , 186 Wash.App. 728, 349 P.3d 32, review denied , 184 Wash.2d 1004, 357 P.3d 666 (2015).

Plaintiffs-respondents Michael Romney, MD, Faron Bauer, MD, and Kristen Childress, ARNP, are former 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.

Romney, Bauer, and Childress filed suit in King County Superior Court and at the same time requested the court to find the arbitration agreement[s] 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 appeal[ed].

Romney , 186 Wash.App. at 733-34, 349 P.3d 32 (footnote omitted).

¶4 While the first appeal was pending, Dr. Romney was diagnosed with terminal cancer. Romney sought to engage in discovery, including discovery for the putative class. FMG agreed to discovery for Dr. Romney's individual claims, but opposed class discovery at that time. FMG argued that class discovery was premature because the superior court or an arbitrator might decline to certify the class.

¶5 On February 17, 2015, this court held that the agreements were not unconscionable and reversed the superior court. Romney , 186 Wash.App. at 733, 349 P.3d 32. Romney petitioned the Supreme Court for review. On September 30, 2015, the Supreme Court denied review. Romney v. Franciscan Med. Grp. , 184 Wash.2d 1004, 357 P.3d 666 (2015).

¶6 On October 2, 2015, Romney attempted to start the arbitration process by reaching out to an arbitrator the parties had discussed using before Romney filed suit in superior court. FMG responded a few days later by inviting Romney to propose "three different arbitrators for the three individual arbitrations." ²

Because the parties disagreed about the availability of class arbitration, they returned to the courts.

¶7 This court issued its mandate terminating the first appeal on November 13, 2015.

¶8 On December 14, 2015, FMG moved to compel arbitration. This time, it asked the court to compel individual arbitration, arguing that the arbitration agreements did not indicate consent to class arbitration. The superior court granted the motion. Romney appeals.

ANALYSIS

Superior Court's Authority

¶9 Romney argues that the superior court erred by determining whether the arbitration agreements permit class arbitration. Romney contends that the availability of class arbitration is an issue for the arbitrator. We conclude that it is a threshold issue of arbitrability for the court to decide.

¶10 While courts enforce a liberal policy favoring arbitration, the courts should usually decide threshold questions of arbitrability. Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002).³ The court should decide questions where the

contracting parties would likely have expected a court to have decided the gateway matter, where they are not likely to have thought that they had agreed that an arbitrator would do so, and, consequently, where reference of the gateway dispute to the court avoids the risk of forcing parties to arbitrate a matter that they may well not have agreed to arbitrate.

Howsam , 537 U.S. at 83-84, 123 S.Ct. 588.

¶11 By contrast, procedural questions, which the court refers to an arbitrator, " ‘grow out of the dispute and bear on its final disposition.’ " Howsam , 537 U.S. at 84, 123 S.Ct. 588 (quoting John Wiley & Sons. Inc. v. Livingston , 376 U.S. 543, 557, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) ). Courts will also refer to arbitration any dispute which the parties have clearly and unmistakably agreed to submit to arbitration. See Howsam , 537 U.S. at 83, 123 S.Ct. 588.

¶12 The Supreme Court has not yet determined whether the availability of class arbitration is a threshold question of arbitrability for the court or a procedural question for the arbitrator. In Green Tree Financial Corp. v. Bazzle , a plurality of the United States Supreme Court held that the arbitrator should decide whether an agreement permitted class arbitration. 539 U.S. 444, 453, 123 S.Ct. 2402, 2407, 156 L.Ed.2d 414 (2003). Since then, in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. , the Supreme Court has pointed out that, in Bazzle , only a plurality agreed on that point.

559 U.S. 662, 680-81, 130 S.Ct. 1758, 176 L.Ed.2d 605 (2010). But, in Stolt-Nielsen , the Court did not revisit the issue because, there, the parties had expressly agreed to have an arbitration panel decide whether the agreement permitted class arbitration. 559 U.S. at 680, 130 S.Ct. 1758.

¶13 The trend in federal courts since Stolt-Nielsen has been that the court should decide whether class arbitration is available. All federal circuits that have addressed this issue in published opinions have arrived at this same conclusion.⁴ Most recently, the Fourth Circuit concluded that a court should determine the availability of class arbitration because of the "significant distinctions between class and bilateral arbitration." Dell Webb Communities, Inc. v. Carlson , 817 F.3d 867, 874-75 (4th Cir.), cert. denied sub nom. ––– U.S. ––––, 137 S.Ct. 567, 196 L.Ed.2d 444 (2016). The Fourth Circuit noted that class arbitration would reduce or eliminate nearly all the benefits of bilateral arbitration.

Dell Webb , 817 F.3d at 875. It reasoned that the Supreme Court was "but a short step away" from announcing that this was a question for the courts. Dell Webb , 817 F.3d at 875.

¶14 We conclude that the availability of class arbitration is a gateway issue of arbitrability. The differences between class arbitration and bilateral arbitration are significant enough that we cannot assume that the parties expected an arbitrator to decide whether it was allowed. The question does not arise out of the underlying dispute over wage violations and retaliation claims. The resolution of the issue should not impact the final disposition of the dispute for each plaintiff. Thus, absent an agreement by the parties, the issue of whether class arbitration is available is a gateway issue of arbitrability properly decided by the superior court.

¶15 Romney argues that Washington law requires a different outcome. In Washington, courts must order the arbitration of all disputes "covered by the substantive scope" of an enforceable arbitration agreement. Townsend v. Quadrant Corp. , 153 Wash.App. 870, 881, 224 P.3d 818 (2009). But Romney's argument assumes that the availability of class arbitration is within the scope of the agreements. We disagree because the question whether the agreements permit class arbitration is a question about the scope of the agreements itself. Therefore, Washington law does not dictate that an arbitrator decide the question.

¶16 Here, Romney claims that the parties agreed in the arbitration agreements to submit to arbitration the issue of whether class arbitration was available. The agreements incorporated the American Arbitration Association (AAA) rules. The supplemental rules for class arbitration provide:

Upon appointment, the arbitrator shall determine as a threshold matter, in a reasoned, partial final award on the construction of the arbitration clause, whether the applicable arbitration clause permits the arbitration to proceed on behalf of or against a class (the "Clause Construction Award"). The arbitrator shall stay all proceedings following the issuance of the Clause Construction Award for a period of at least 30 days to permit any party to move a court of competent jurisdiction to confirm or to vacate the Clause Construction Award.^[5]

These rules

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