349 P.3d 32
Wash. Ct. App.2015Background
- Three former Franciscan Medical Group (FMG) employees (Romney, Bauer, Childress) signed employment contracts containing an arbitration addendum and sued FMG for wage violations, retaliation, and class claims.
- Plaintiffs sued in King County Superior Court and simultaneously asked the court to find the arbitration agreement unconscionable; FMG moved to compel arbitration.
- The trial court found the arbitration addendum unconscionable, invalidated it, and denied FMG’s motion to compel arbitration.
- FMG appealed; the Court of Appeals reviews arbitration-denial orders de novo and applies the Federal Arbitration Act (FAA) where applicable, alongside Washington law favoring arbitration.
- Key contested provisions: ability of FMG to seek injunctive/equitable relief in court, limitation on exemplary damages, confidentiality under AAA rules, fee-splitting, and potential binding of non-signatories.
- The appellate court concluded the arbitration addendum was neither procedurally nor substantively unconscionable, or that offending provisions were severable, and reversed to compel arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability (adhesion/take-it-or-leave-it) | Plaintiffs had no meaningful choice, were pressured to sign, and couldn’t negotiate terms | FMG argued the clause was clear, conspicuous, repeatedly signed, and employees could choose other employment | Not procedurally unconscionable — adhesion alone insufficient; plaintiffs had meaningful choice and clause was conspicuous |
| Substantive unconscionability — court injunctive/equitable relief reserved to FMG | These contract clauses make arbitration one-sided by letting FMG go to court for injunctions while forcing employees to arbitrate | FMG: clauses are severable, mutuality measured by effect, not mirror obligations | Not severing-arbitration: even if those clauses were unconscionable they are severable and do not invalidate arbitration |
| Limitation on exemplary/punitive damages | Arbitration clause bars punitive/exemplary damages, conflicting with statutory right (RCW 49.52) | FMG: clause allows damages "as required by law" — arbitrator cannot deny statutory remedies | Held for FMG: statutory exemplary damages are available despite general limitation because agreement preserves damages required by law |
| Confidentiality (AAA rules) | Confidentiality would hide patterns, impede claims, and is substantively unconscionable | FMG: AAA rule allows exceptions; confidentiality can be waived by agreement or where law requires disclosure | Not unconscionable here; clause allows disclosure by agreement or when law requires; offer to arbitrate non‑confidentially addressed affordability concerns |
| Fee‑splitting and access to forum | Clause requires equal sharing of arbitration costs, deterring claimants | FMG: clause shifts costs to FMG if employee shows inability to pay; FMG will initially bear costs pending arbitrator determination | Not unconscionable; affordability addressed case‑by‑case and FMG must bear costs pending arbitrator review |
| Non‑signatories bound by arbitration | Plaintiffs contended others were improperly bound | FMG: contract/agency/privity and same‑facts principles can bind non‑signatories | Court: non‑signatories may be compelled when related by contract/agency or claims arise from same facts; addressed as permissible |
Key Cases Cited
- Perry v. Thomas, 482 U.S. 483 (U.S. 1987) (FAA supplies substantive federal law favoring arbitration)
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (courts must indulge every presumption in favor of arbitration)
- Zuver v. Airtouch Communications, Inc., 153 Wn.2d 293 (Wash. 2004) (mutuality/effect of arbitration clause determines substantive unconscionability)
- Adler v. Fred Lind Manor, 153 Wn.2d 331 (Wash. 2004) (factors for adhesion/meaningful choice in procedural unconscionability)
- McKee v. AT&T Corp., 164 Wn.2d 372 (Wash. 2008) (confidentiality and unconscionability in arbitration clauses)
- Hill v. Garda CL Nw., Inc., 179 Wn.2d 47 (Wash. 2013) (arbitration fee‑sharing challenges and access to arbitral forum)