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Wednesday, February 24, 2010

Court of Appeal Invalidates Unconscionable Arbitration Agreement

This case does not break any real new ground, but it is worth a mention. In Suh v. Superior Court (Cha Hollywood Medical Center) --- Cal.Rptr.3d ----, 2010 WL 551410 (February 18, 2010), the Second District Court of Appeal held that an arbitration agreement between a hospital and a medical group did not bind individual doctors who did not sign the agreement and derived no benefits from the medical group’s relationship with the hospital during the time that the agreement was in effect. Further, the Court held that the arbitration provision in a second agreement were procedurally and substantively unconscionable where they contained "egregious and draconian" limitations on potential remedies, required each party to share in arbitration expenses, empowered arbitrator to assess expenses against any of the parties, placed limitations on discovery, and did not compel a reasoned opinion or findings by the arbitrator. Such unconscionablity so tainted the agreement that the offensive provisions could not be severed, rendering the agreement to arbitrate unenforceable.

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