Thach v. Matrix Anesthesia P.S.
| Decision Date | 19 August 2019 |
| Docket Number | No. 78669-5-I,78669-5-I |
| Parties | TIEN THACH, M.D., Respondent, v. MATRIX ANESTHESIA P.S., a Washington corporation, M. SEAN KINKAID, M.D., in individual person, JOHN COSTELLO, M.D., an individual person, JOHN DOES I-XX, individual persons. Appellants. |
| Court | Washington Court of Appeals |
UNPUBLISHED OPINION
HAZELRIGG-HERNANDEZ, J. — Parties may agree to submit disputes regarding the scope of an arbitration provision to arbitration. Dr. Tien Thach entered into an employment agreement with Matrix Anesthesia that contained such a provision. After Matrix terminated Dr. Thach, she sued, alleging that her termination related to her actions as a corporate shareholder rather than an employee. The trial court denied Matrix's motion to compel arbitration. Because the employment agreement assigns disputes regarding the scope of the arbitration agreement to the arbitrator, we reverse and remand for an order to compel arbitration.
FACTS
Dr. Thien Thach signed an employment agreement with Matrix Anesthesia, P.S., in 2010. After working with them for more than three years, she was approved for shareholder status. She signed a second employment agreement in 2014. Each employment agreement contained an arbitration provision with the following language:
Arbitration. Any issue, dispute, controversy or claim arising out of or relating to this Agreement or the breach thereof shall be resolved by arbitration and, except as may otherwise be provided herein, the arbitration shall be submitted to the Seattle office of the Judicial Arbitration and Mediation Service (JAMS). The parties hereto expressly waive any right to file a lawsuit in any court involving the same issue, dispute, controversy or claim until 30 days after the arbitration award has been issued. The arbitration shall be governed by the Washington Rules of Evidence and RCW 7.04. Any dispute as to whether any issue is to be resolved by arbitration shall be submitted as part of the arbitration proceeding.
After she became a shareholder, she became a divisional compliance officer and board treasurer.
Thach voiced concerns regarding corporate practices that she believed violated the federal anti-kickback statute. In response, Thach encountered hostility from the corporate board. Thach resigned as treasurer, board member, and division compliance officer. She was fired soon after.
Thach sued Matrix for violation of her shareholder rights, arguing that her shareholder status was not terminated in accord with the bylaws. The relevant clause in the bylaws reads:
Termination of Shareholder's Employment. The employment of a person who is a Shareholder may be terminated by the Corporation only if (i) he or she is terminated for "cause" as that term is definedin his or her Employment Agreement, (ii) the termination is recommended by 66 2/3% of the shareholders of the Division in which the person works, and the termination is approved by a majority of all Directors, or (iii) the termination is recommended by a majority of the Quality Assurance Committee, and approved by sixty percent (60%) of all Directors.
Matrix moved to compel arbitration under the employment agreements. The trial court denied the motion to compel arbitration, holding that Thach's claims were outside the scope of the arbitration provision and that the employment agreements were procedurally unconscionable. Matrix appeals that order.
DISCUSSION
Motions to compel arbitration are reviewed de novo. Adler v. Fred Lind Manor, 153 Wn.2d 331, 342, 103 P.3d 773 (2004). The Federal Arbitration Act (FAA),1 applies to all employment contracts except for employment contracts of certain transportation workers. Adler, 153 Wn.2d at 341. Washington courts enforce the policies in the FAA and RCW 7.04A.060 favoring arbitration. Romney v. Franciscan Med. Grp., 186 Wn. App. 728, 734-35, 349 P.3d 32 (2015). Courts must indulge every presumption in favor of arbitration, including in the contract language itself. Adler, 153 Wn.2d at 342.
Arbitration is a matter of contract, and parties may only be forced to submit disputes to arbitration when they have agreed to submit those disputes to arbitration. Hill v. Garda CL NW, Inc., 179 Wn.2d 47, 53, 308 P.3d 635 (2013) (quoting Satomi Owners Ass'n v. Satomi, LLC, 167 Wn.2d 781, 810, 225 P.3d 213(2009)). Gateway disputes regarding the validity of the contract or the arbitration provision "are preserved for judicial determination, as opposed to arbitrator determination, unless the parties' agreement clearly and unmistakably provides otherwise." Id. at 53, (see Satomi, 167 Wn.2d at 809. When the validity of an arbitration agreement is challenged, ordinary contract defenses such as unconscionability may invalidate the agreement. McKee v. AT&T Corp., 164 Wn.2d 372, 383, 191 P.3d 845 (2008).
In order to determine if the contract and arbitration provision are valid, we must first determine which contract applies. The parties did not meaningfully brief or argue the question of which contract represented the agreement between Thach and Matrix at the time of her termination. Instead, the parties argued whether each agreement was procedurally unconscionable. Some Court of Appeals cases suggest that a subsequent contract between the same parties regarding the same subject matter must be interpreted together, with the second contract controlling on inconsistencies.2 That approach would warrant considering the procedural unconscionability of each employment agreement separately. But cases from the Washington Supreme Court, both old and new, adopt the opposite conclusion. In Higgins v. Stafford, the Court reiterated the rule that the legal effect of a subsequent contract made by the same parties and covering the same subjectmatter, but containing inconsistent terms is to rescind the earlier contract, and the subsequent contract is the only agreement between the parties on the subject. 123 Wn.2d 160, 165-66, 866 P.2d 31 (1994) (quoting Bader v. Moore Bldg. Co., 94 Wash. 221, 224, 162 P. 8 (1917)); Cf. Tingley v. Fairhaven Land Co., 9 Wash. 34, 39-40, 36 P. 1098 (1894), overruled on other grounds by Rosellini v. Banchero, 83 Wn.2d 268, 273, 517 P.2d 955 (1974). We are bound by the Supreme Court's rule.
Here, Dr. Thach signed employment agreements with Matrix in 2010 and 2014. The two contracts are substantially similar, but the contract signed in 2014 significantly expands section 11, regarding disability, substantively changes section 12, regarding termination and suspension, and references either the divisional board or corporate board rather than the executive board. Because the contracts involve the same parties, the same subject matter, and contain inconsistent terms, we consider the 2014 contract to be the only agreement between Thach and Matrix.
Washington courts recognize both substantive and procedural unconscionability. Adler, 153 Wn.2d at 344 (citing Nelson v. McGoldrick, 127 Wn.2d 124, 131, 896 P.2d 1258 (1995). Procedural unconscionability is the lack of meaningful choice, considering the circumstances surrounding the agreement, (1) "[t]he manner in 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." Id. at 345 (quotingNelson 127 Wn.2d at 131). Those factors should "not be applied mechanically without regard to whether . . . a meaningful choice existed." Id. at 345 (quoting Nelson, 127 Wn.2d at 131). Procedural unconscionability is sufficient to render an agreement unenforceable. Steven Burnett v. Pagliacci Pizza, Inc., 442 P.3d 1267, 1272 (Wash. Ct. App. 2019). A trial court's final conclusion of unconscionability is a question law reviewed de novo. McKee, 164 Wn.2d at 383 (citing Nelson, 127 Wn.2d at 131).
Thach argues that the agreement is procedurally unconscionable because the arbitration provision is buried in the fine print of the agreement and that a reasonable person would not be able to understand the provision. But the agreement itself does not support a finding of procedural unconscionability. The arbitration provision is not hidden. It has its own numbered section in the agreement, and is titled Arbitration in bold font. No "reasonable person" standard applies to the analysis. While Thach argues that the provision's reference to a repealed statute makes it ambiguous, the provision explicitly states that the parties agree to submit disputes to Judicial Arbitration and Mediation Service and waive their right to file a lawsuit until 30 days after an arbitration award.
Because the agreement itself does not support a finding of unconscionability, the court must examine the circumstances surrounding the agreement. Thach alleges that the employment agreement is an adhesion contract. An adhesion contract is (1) a "standard form printed contract," (2) "prepared by one party and submitted to the other on a 'take it or leave it' basis," and (3) "where there was 'no true equality of bargaining power' between theparties." Adler, 153 Wn.2d at 347 (quoting Yakima County (W. Valley) Fire Prot. Dist. No. 12 v. City of Yakima, 122 Wn.2d 371, 393, 858 P.2d 245 (1993). Whether a contract is an adhesion contract can help show procedural unconscionability in a contract, but does not necessarily render it unconscionable. Id. at 347-48.
There is no dispute that the employment agreement is an adhesion contract. However, an employee cannot rely solely on a lack of bargaining power to show that an adhesion contract is unconscionable. Zuver v. Airtouch Commc'ns, Inc., 153 Wn.2d 293, 306, 103 P.3d 753 (2004). The employee must show some evidence that the employer (1) refused to respond to the...
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