Young Seok Suh v. Superior Court

• Decision Date: 18 February 2010
• Docket Number: No. B219174.,B219174.
• Citation: 181 Cal.App.4th 1504
• Court: California Court of Appeals Court of Appeals
• Parties: YOUNG SEOK SUH et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent; CHA HOLLYWOOD MEDICAL CENTER, L.P., et al., Real Parties in Interest.

181 Cal.App.4th 1504

YOUNG SEOK SUH et al., Petitioners, v. THE SUPERIOR COURT OF LOS ANGELES COUNTY, Respondent CHA HOLLYWOOD MEDICAL CENTER, L.P., et al., Real Parties in Interest.

No. B219174.

Court of Appeals of California, Second District, Division Five.

February 18, 2010.

Cohen & Lord, Bruce M. Cohen, Jonathan F. Golding; and John D. Harwell for Petitioners.

No appearance for Respondent.

Lim, Ruger & Kim, Bruce G. Iwasaki and Lisa J. Yang for Real Party in Interest, CHA Hollywood Medical Center, L.P.

Law Offices of Timothy B. McCaffrey, Jr., Timothy B. McCaffrey, Jr., for Real Parties In Interest, H.P. Anesthesia Medical Group, Inc., Hyung R. Shin, Sung T. Kim, Romeo Velasco and Sung H. Kim.

OPINION

MOSK, J.

INTRODUCTION

Petitioners and plaintiffs Young Seok Suh and Yongkew Chung (plaintiffs) are anesthesiologists who were with a medical group that entered into two anesthesiology contracts with a hospital. They seek review of an order by the trial court compelling arbitration. We grant the petition, holding that plaintiffs did not agree to arbitrate disputes relating to one of the contracts and that the terms of the arbitration clause in the other contract are, because of the applicable rules limiting damage remedies, unconscionable, rendering the agreement to arbitrate unenforceable.

BACKGROUND

Plaintiffs were anesthesiologists on the medical staff of real party in interest and defendant Hollywood Presbyterian Medical Center, L.P. CHA Hollywood Medical Center, L.P.,¹ which does business under the name "Hollywood Presbyterian Medical Center," operated the Hospital. In 2005, plaintiffs formed a group, "HP Anesthesia LLC" (HP LLC), with defendants and real parties in interests, Hyung R. Shin, Sung T. Kim, Romeo Velasco and Sung H. Kim,² all of whom are anesthesiologists. In 2006, HP LLC entered into an "Agreement for Anesthesiology Department Coverage" (2006 Agreement) with the Hospital "to provide all anesthesiology and pain management services at [the Hospital] and to supervise the operation of the Department." Plaintiffs became bound to that agreement by signing a "Waiver and Agreement" form.

A week later, the doctors in HP LLC formed HP Inc. to succeed HP LLC as a party to the 2006 Agreement, and the doctors, along with others, became shareholders of the corporation. The 2006 Agreement was assigned by HP LLC to HP Inc.

Plaintiffs allege that in 2008, they were removed from the Hospital Anesthesiology Department schedule because of their ages and their national origin. They contend that the defendant doctors hired a number of younger doctors. In 2008, HP Inc. and the Hospital entered into a new agreement for anesthesiology department coverage, again providing for anesthesiology services (2008 Agreement). Plaintiffs assert they did not sign or accede to that agreement and did not see or receive it until months after it had been executed. Plaintiffs allege that after their removal from the schedule, they did not practice medicine at the Hospital.

Plaintiffs, in their complaint, allege the following causes of action: national origin discrimination against the Hospital and HP Inc. in violation of Government Code section 12940, subdivision (a) (first); age discrimination against the Hospital and HP Inc. in violation of Government Code section 12940, subdivision (a) (second); aiding and abetting age "and/or" national origin discrimination against the Hospital in violation of Government Code section 12940, subdivision (i) (third); aiding and abetting age "and/or" national origin discrimination against HP Inc. and the individual doctor defendants in violation of Government Code section 12940, subdivision (i) (fourth); national origin discrimination in violation of Civil Code section 51 et seq. against the Hospital and HP Inc. (fifth); retaliation in violation of Government Code section 12940 et seq. against the Hospital (sixth); retaliation in violation of Health and Safety Code section 1278.5 against the Hospital (seventh); denial of the vested right to practice medicine against the Hospital (eighth); intentional contract interference against the Hospital (ninth); intentional prospective economic advantage interference against the Hospital (10th); intentional prospective economic advantage interference against HP Inc. and the individual doctor defendants (11th); contract breach against the individual doctor defendants (12th); contract breach against HP Inc. (13th); fiduciary duty breach against the individual doctor defendants (14th); negligence against the individual doctor defendants (15th); accounting against HP Inc. and the individual doctor defendants (16th); declaratory relief against the Hospital (17th); and declaratory relief against all named defendants (18th).

Defendants filed a petition to compel arbitration, invoking the following arbitration provision in the 2006 Agreement: "Any dispute or controversy arising under, out of or in connection with, or in relation to this Agreement, or any amendment hereof, or the breach hereof shall be determined and settled by arbitration in Los Angeles County, California, in accordance with the American Health Lawyers Association Alternative Dispute Resolution Service Rules of Procedure for Arbitration and applying the laws of the State. Any award rendered by the arbitrator shall be final and binding upon each of the parties, and judgment thereon may be entered in any court having jurisdiction thereof."

Defendants also rely upon the arbitration clause in the 2008 Agreement, which states in part: "Any dispute . . . arising under, out of or in connection with, or in relation to this Agreement . . . shall be determined and settled by arbitration in Los Angeles County, California, in accordance with the Commercial Rules of Arbitration . . . of the Judicial Arbitration and Mediation Services (`JAMS')³ before one arbitrator applying the laws of the State. The parties shall attempt to mutually select the arbitrator. In the event they are unable to mutually agree, the arbitrator shall be selected by the procedures prescribed by the JAMS Rules. Any award rendered by the arbitrator shall be final and binding upon each of the parties, and judgment thereon may be entered in any court having jurisdiction thereof. The costs shall be borne equally by both parties."

Plaintiffs filed three declarations in opposition to the petition to compel arbitration. Suh described his age and ancestry, the Hospital's organization, and the organization of HP LLC. Suh stated he never received a copy of the 2006 Agreement, but was provided with the waiver document by which he acceded to the 2006 Agreement. Suh was told that if he did not execute the May 2006 waiver document, he would not be permitted to practice anesthesiology at the Hospital. Suh only saw the 2006 Agreement after he signed the waiver form, and he was never advised of the arbitration clause or its consequences. He contended that the American Health Lawyers Association Alternative Dispute Resolution Service Rules of Procedure for Arbitration (AHLA Rules), provided for in the 2006 Agreement, would result in a waiver of his rights and remedies to recover consequential, incidental, and punitive damages; HP LLC was not legally qualified to practice medicine, rendering the 2006 Agreement illegal; and he did not sign and was not provided a copy of the 2008 Agreement.

Suh further declared that among the original shareholders of HP Inc. were plaintiffs, the Kims, Shin, and Velasco. The original shareholders of HP Inc. never entered into a written shareholder's agreement, and no officers or directors were actually elected. Suh denied being a director, officer, or employee of HP Inc. Commencing in May 2006, he rendered anesthesiology services at the Hospital as provided for in the 2006 Agreement, for which services he was compensated. He included facts relating to his allegations of discrimination, including that he was removed from the Hospital's anesthesiology department schedule. He also alleged other acts of malfeasance.

In his declaration, Chung reiterated many of the points raised by Suh. Chung declared that he had not seen the 2006 Agreement until after he signed the waiver form and did not sign, nor was he provided with, the 2008 Agreement until September 2008. Chung further declared that on May 1, 2008, he was removed from the anesthesiology department schedule.

Jonathan Golding, plaintiffs' attorney, submitted a declaration to which he attached a copy of the AHLA Rules. Section 6.06 of the AHLA Rules states in part: "[T]he arbitrator may not award and there shall be no claim available for consequential, exemplary, incidental, punitive or special damages in an action other than an action arising from a tort unrelated to employment or the termination of employment. In an action arising from a tort unrelated to employment or the termination of employment, the arbitrator may not award consequential, exemplary, incidental, punitive or special damages against a party unless the arbitrator determines, based on the record, that there is clear and convincing evidence that the party against whom such damages are awarded is guilty of conduct evincing an intentional or reckless disregard for the rights of another party or fraud, actual or presumed."

During the hearing, the trial court (respondent) stated it would grant defendants' petition to compel arbitration, but then raised the issue of severing the use of the AHLA Rules, apparently because of the substantive unconscionability question. As noted, the AHLA Rules barred certain remedies.

The following colloquy between plaintiffs' counsel and the respondent court occurred concerning severing the AHLA Rules from the arbitration: "[COUNSEL]: . . . we won't waive our right to contest whether the court's decision is right on this obviously. [¶] . . . [¶] To the extent the court is going to issue an order in this manner, we would prefer if we have to arbitrate, to...