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A California Court of Appeal ordered arbitration of a dispute surrounding a doctor's termination from an organization providing insurance coverage for medical malpractice claims, rejecting unconscionability arguments based upon surprise and lack of mutuality.
In Villar v. Mutual Protection Trust, No. B191760, 2007 WL 1519788 (Cal. Ct. App. May 25, 2007), Dr. Villar had once belonged to Mutual Protection Trust (MPT), which provided medical malpractice coverage for its members. However, Villar's membership was involuntarily terminated after he was accused of medical malpractice.
Villar sued MPT for breach and fraud over this termination. MPT sought to compel arbitration; Villar argued that he had never agreed to arbitrate, and further that the arbitration provision in the MPT Agreement was an unconscionable contract of adhesion. The trial court ultimately found that no valid agreement to arbitrate existed.
In reversing the trial court's decision, the Court noted that when he applied for membership with MPT, Villar had signed a letter acknowledging having "received and read" a copy of the Agreement, which contained the arbitration provision. His signature indicated his acceptance of the terms of that Agreement.
Further, the Court noted that just because the arbitration provision lacked specificity about which rules of arbitration would be followed, and may have lacked specificity about how to select the arbitrator, this did not invalidate an otherwise valid agreement.
Finally, the Court found neither procedural nor substantive unconscionability in the contract. Procedurally, even if it was a contract of adhesion, Villar could not establish the required element of "surprise," as the arbitration provision was in no way hidden, and had in fact been invoked by Villar himself in an earlier dispute with MPT.
Substantively, an agreement may lack total "mutuality" if exceptions to arbitration are carved out for "legitimate business needs." Here, MPT's reservation of judicial access for fee collection and disillusion easily fit that definition, and no lack of mutuality was found to exist. The MPT arbitration agreement was therefore valid and enforceable.
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