A California Court held that a physician did not consent to an arbitration agreement because he did not sign the agreement, and the arbitration agreement was not incorporated by reference because there was no clear and unequivocal reference to the agreement.

In Woods v. Southern California Permanente Medical Group, No. B198987, 2008 WL 2210092 (Cal. Ct. App. May 29, 2008), Woods was a member of the Southern California Permanente Medical Group (Medical Group), a partnership of physicians. Medical Group's partnership agreement stated that the "Rules and Regulations . . . will govern the conduct of the business of the partnership," and "establish working conditions." The Rules and Regulations (R & Rs) contained an arbitration agreement.

Woods sued Medical Group for retaliation after he complained about inadequate patient care and was placed on administrative leave. Medical Group moved to compel arbitration, but the trial court held that the arbitration agreement was unconscionable because it was unilateral, requiring physicians but not Medical Group to arbitrate their disputes. The jury awarded Woods $200,000 in back pay.

Medical Group amended the R & Rs to make arbitration binding on both parties, and sent the amended agreement to its physicians via email, asking them to sign it. Medical Group then fired Woods, less than two months after Woods had won his first suit. Woods sued for wrongful termination, and Medical Group moved to compel arbitration under the amended arbitration agreement. Woods argued that he never consented to arbitration because he never signed the amended arbitration agreement.

The Court agreed with Woods and denied Medical Group's motion to compel, citing the fact that there was no evidence that Woods signed the agreement. The Court held that when parties to a proposed contract fix the manner in which assent is to be manifested, assent in any other manner will not be presumed. Thus, since Medical Group required that physicians sign the amended agreement in order to assent to it, and Woods never signed it, Woods did not assent to the agreement.

Medical Group further argued that Woods did not need to sign the arbitration agreement because he assented to the partnership agreement that incorporated the R & Rs, which included the amended arbitration agreement. Thus, Medical Group argued that the arbitration agreement was incorporated by reference to the partnership agreement to which Woods was a party.

The Court held that in order for the terms of a document to be incorporated by reference into a contract, the reference must be clear and unequivocal. The Court then rejected Medical Group's argument, holding that the partnership agreement did not clearly and unequivocally incorporate the arbitration agreement because it only referenced those R & Rs that "govern the conduct of the business" or "establish working conditions," but did not mention arbitration or dispute resolution at all.