Tien Thach, M.d. v. Matrix Anesthesia, P.s. ( 2019 )

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
TIEN THACH, M.D., ) No. 78669-5-I
Respondent, ) DIVISION ONE
v. ) UNPUBLISHED OPINION
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.
___________________________________ ) FILED: August 19, 2019
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.
No. 78669-5-1/2
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 defined
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in 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
The 2014 employment agreement contains a valid agreement to arbitrate
disputes arising out of or related to that agreement.
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 2131 9 usc, §~1-16
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(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.” ki. 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).
A. The 2014 contract is the only existing agreement between Thach
and Matrix.
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 subject
2S~g Durand v. HIMC Corp., 151 Wn. App. 818, 830, 214 P.3d 189 (2009), (citing
Flowery. T.R.A. Indus., Inc., 127Wn. App. 13, 29, 111 P.3d 11924
No. 78669-5-1/5
matter, 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.
B. The 2014 agreement is not procedurally unconscionable.
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.” j~çj.. at 345 (quoting
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Nelson 127 Wn.2d at 131). Those factors should “not be applied mechanically
without regard to whether . . . a meaningful choice existed.” j.ç[~ 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 the
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parties.” Adler, 153 Wn.2d at 347 (quoting Yakima County (W. Valley) Fire Prot.
Dist. No. 12v. 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. k~. 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 employee’s questions or
concerns, (2) placed undue pressure on the employee to sign the agreement
without a reasonable opportunity to consider the terms, (3) and/or that a
reasonable person could not understand the terms. j4. at 306-07.
Based on the uncontested facts alleged by Thach, the 2014 agreement was
not procedurally unconscionable. Thach’s only other argument regarding
procedural unconscionability and the 2014 agreement is her significant investment
in Matrix. She invested half of her first year salary and twenty-five percent of her
second year salary in Matrix in order to secure shareholder status. She would
have suffered tremendous financial and professional loss if she did not sign the
contract and was forced to start again with a new employer.
While these facts indicate Thach lacked relative bargaining power, these
consequences apply to anyone who has expended the effort to become a partner
in the organization that employs them. The facts do not show that Matrix refused
to respond to her concerns, placed undue pressure on Thach, or that a reasonable
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No. 78669-5-118
person could not understand the terms. Neither do the facts demonstrate that
Thach lacked other opportunities for employment or was unable to exercise a
meaningful choice. Thach’s investment in her employment and the benefits
derived from maintaining it are not the sort of undue pressures that cause a new
employment agreement to be unenforceable. Because Thach fails to allege
factors that show the 2014 agreement is procedurally unconscionable, we hold that
the employment agreement and arbitration provision are valid and enforceable.
II. The arbitrator must decide whether Thach’s claims fall within the scope of
the arbitration agreement.
After initial briefing in this case, the United States Supreme Court issued an
opinion that definitively resolved the question of who should decide whether
Thach’s claims are within the scope of the arbitration clause. When parties
delegate the question of arbitrability to the arbitrator, the arbitrator must resolve
any disputes regarding that question.
Who decides issues of arbitrability is a question of contract. Henry Schein,
inc. v. Archer and White Sales, Inc., 139 S. Ct. 524, 527, 202 L. Ed. 480 (2019).
Parties may make an agreement that an arbitrator, rather than a court, will resolve
threshold arbitrability questions, as long as the contract clearly and unmistakably
does so. ~ at. 530. When the parties delegate the threshold arbitrability question
to an arbitrator, the court has no power to decide the issue, even if the argument
that arbitration applies to the dispute appears wholly groundless. ki. at 529.
Here, the contract clearly and unmistakably assigns questions of
arbitrability to the arbitrator. The employment agreement explicitly states that
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No. 78669-5-1/9
“[a]ny dispute as to whether any issue is to be resolved by arbitration shall be
submitted as part of the arbitration proceeding.” The language used is expansive
(“any”), mandatory (“shall’), and encompasses questions of arbitrability. Because
the contract clearly assigns the dispute to arbitration, the court must permit an
arbitrator to decide.
In response to Henry Schein, Thach directs the court to Nelson v. Westport
Shipyard. Inc., a case where the arbitration clause did not assign questions of
arbitrability to the arbitrator. 140 Wn. App. 102, 163 P.3d 807 (2007). While Thach
is correct that Nelson involves shareholder and employment agreements, only one
of which contained an arbitration clause, the arbitration clause in Nelson was
narrow and required arbitration of “only those disputes ‘arising out of this
Agreement.” 140 Wn. App. at 113-14. In fact, the court in Nelson carefully
distinguished the arbitration clause from one that required disputes regarding the
validity, enforceability, or scope of an agreement or arbitration provision to be
submitted to arbitration. 140 Wn. App. at 112-13, distinguishing Buckeye Check
Cashing, Inc. v. Cardegna. 546 U.S. 440, 442-43, 126 S. Ct. 1204, 163 L. Ed. 2d
1038 (2006). Nelson is therefore inapplicable here, because Thach’s employment
agreement explicitly states that the question of arbitrability must be submitted as
part of the arbitration proceeding.
Because the agreement clearly and unmistakably assigned questions of
arbitrability to the arbitrator, Henry Schein controls, and the arbitrator, not the court,
must decide whether Thach’s claims fall within the scope of the employment
agreement. We do not reach the question of whether Thach’s claims fall within the
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No. 78669-5-1110
scope of the arbitration agreement, and remand for the entry of an order
compelling arbitration of Thach’s claims.
Reverse and remand.
WE CONCUR:
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