Armendariz v. Foundation Health Psychcare Services, Inc.

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Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 (2000), was a case decided by the Supreme Court of California that defined the California standard for unconscionability.

Supreme Court of California the highest court in the U.S. state of California

The Supreme Court of California is the highest and final court in the courts of the State of California. It resides in the State Building in San Francisco in Civic Center overlooking Civic Center Square along with City Hall. It also holds sessions in Los Angeles and Sacramento. Its decisions are binding on all other California state courts.

California State of the United States of America

California is a state in the Pacific Region of the United States. With 39.6 million residents, California is the most populous U.S. state and the third-largest by area. The state capital is Sacramento. The Greater Los Angeles Area and the San Francisco Bay Area are the nation's second and fifth most populous urban regions, with 18.7 million and 8.8 million residents respectively. Los Angeles is California's most populous city, and the country's second most populous, after New York City. California also has the nation's most populous county, Los Angeles County, and its largest county by area, San Bernardino County. The City and County of San Francisco is both the country's second-most densely populated major city after New York City and the fifth-most densely populated county, behind only four of the five New York City boroughs.

Unconscionability

Unconscionability is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining power, that they are contrary to good conscience. Typically, an unconscionable contract is held to be unenforceable because no reasonable or informed person would otherwise agree to it. The perpetrator of the conduct is not allowed to benefit, because the consideration offered is lacking, or is so obviously inadequate, that to enforce the contract would be unfair to the party seeking to escape the contract.

Two former employees of Foundation Health Psychcare Services, Inc. (now part of Health Net), Marybeth Armendariz and Dolores Olague-Rodgers, filed complaints for wrongful termination against their former employer, contending in part that the presence of certain unconscionable provisions in their employment arbitration agreement should render the entire arbitration agreement unenforceable. Foundation Health argued that if some of the provisions were unconscionable or contrary to public policy, the proper remedy would be to strike or restrict those clauses pursuant to Civil Code section 1670.5, and to enforce the rest of the arbitration agreement.

Health Net

Health Net, Inc., a Centene company, is an American health care insurance provider. HMO, POS, insured PPO and government contracts subsidiaries provide health benefits to approximately 5.9 million individuals in all 50 states and the District of Columbia through group, individual, Medicare, Medicaid, Tricare and Veterans Affairs programs. Health Net's behavioral health services subsidiary, MHN, provides behavioral health, substance abuse and employee assistance programs (EAPs) to approximately 7.3 million individuals in various states, including the company's own health plan members. The company's subsidiaries also offer managed health care products related to prescription drugs, and offer managed health care product coordination for multi-region employers and administrative services for medical groups and self-funded benefits programs. In July 2015, Centene announced its intention to acquire Health Net for $6.8 billion. St. Louis-based Centene completed its acquisition of Health Net in March 2016.

Public policy is the principled guide to action taken by the administrative executive branches of the state with regard to a class of issues, in a manner consistent with law and institutional customs.

The Civil Code of California is a collection of statutes for the State of California. The code is made up of statutes which govern the general obligations and rights of persons within the jurisdiction of California. It was based on a civil code originally prepared by David Dudley Field II for the state of New York. It is one of the 29 California Codes and was among the first four enacted in 1872.

In summarising developments leading to the decision of the Supreme Court of California, Judge Stanley Mosk stated:

Stanley Mosk American judge

Morey Stanley Mosk was an Associate Justice of the California Supreme Court for 37 years (1964–2001), and holds the record for the longest-serving justice on that court. Before sitting on the Supreme Court, he served as Attorney General of California and as a trial court judge, among other governmental positions. Mosk was the last Justice of the California Supreme Court to have served in non-judicial elected office prior to his appointment to the bench. The Los Angeles County Courthouse is named after him.

The trial court chose the employees' preferred solution of refusing to enforce the arbitration agreement, but the Court of Appeal sided with the employer and enforced the agreement minus the one provision it found unconscionable. We [i.e. the Supreme Court] conclude ... that the arbitration agreement is unenforceable and that therefore the Court of Appeal's judgment must be reversed. [1]

The court required that there be both a procedural and substantive element of unconscionability for a contract to be voided. [2]

Contract agreement having a lawful object entered into voluntarily by multiple parties

A contract is a legally-binding agreement which recognises and governs the rights and duties of the parties to the agreement. A contract is legally enforceable because it meets the requirements and approval of the law. An agreement typically involves the exchange of goods, services, money, or promises of any of those. In the event of breach of contract, the law awards the injured party access to legal remedies such as damages and cancellation.

Related Research Articles

Arbitration, in the context of United States law, is a form of alternative dispute resolution. Specifically, arbitration is an alternative to litigation through which the parties to a dispute agree to submit their respective positions to a neutral third party for resolution. In practice arbitration is generally used as a substitute for litigation, particularly when the judicial process is perceived as too slow, expensive or biased. In some context, an arbitrator may be described as an umpire.

In proprietary software, an end-user license agreement (EULA) or software license agreement is the contract between the licensor and purchaser, establishing the purchaser's right to use the software. The license may define ways under which the copy can be used, in addition to the automatic rights of the buyer including the first sale doctrine and 17 U.S.C. § 117.

United States labor law Labor law in the USA

United States labor law sets the rights and duties for employees, labor unions, and employers in the United States. Labor law's basic aim is to remedy the "inequality of bargaining power" between employees and employers, especially employers "organized in the corporate or other forms of ownership association". Over the 20th century, federal law created minimum social and economic rights, and encouraged state laws to go beyond the minimum to favor employees. The Fair Labor Standards Act of 1938 requires a federal minimum wage, currently $7.25 but higher in 28 states, and discourages working weeks over 40 hours through time-and-a-half overtime pay. There are no federal or state laws requiring paid holidays or paid family leave: the Family and Medical Leave Act of 1993 creates a limited right to 12 weeks of unpaid leave in larger employers. There is no automatic right to an occupational pension beyond federally guaranteed social security, but the Employee Retirement Income Security Act of 1974 requires standards of prudent management and good governance if employers agree to provide pensions, health plans or other benefits. The Occupational Safety and Health Act of 1970 requires employees have a safe system of work.

Federal Arbitration Act

The United States Arbitration Act, more commonly referred to as the Federal Arbitration Act or FAA, is an act of Congress that provides for judicial facilitation of private dispute resolution through arbitration. It applies in both state courts and federal courts, as was held constitutional in Southland Corp. v. Keating. It applies where the transaction contemplated by the parties "involves" interstate commerce and is predicated on an exercise of the Commerce Clause powers granted to Congress in the U.S. Constitution.

Illegal agreement agreement that the courts will not enforce because the purpose of the agreement is to achieve an illegal end

An illegal agreement, under the common law of contract, is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end. The illegal end must result from performance of the contract itself. The classic example of such an agreement is a contract for murder.

Non-compete clause

In contract law, a non-compete clause, or covenant not to compete (CNC), is a clause under which one party agrees not to enter into or start a similar profession or trade in competition against another party. Some courts refer to these as "restrictive covenants." As a contract provision, a CNC is bound by traditional contract requirements including the consideration doctrine.

Arbitration technique for the resolution of disputes

Arbitration, a form of alternative dispute resolution (ADR), is a way to resolve disputes outside the courts. The dispute will be decided by one or more persons, which renders the "arbitration award". An arbitration award is legally binding on both sides and enforceable in the courts.

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), is a United States Supreme Court case concerning contract law and arbitration. The case arose from a class action filed in Florida against a payday lender alleging the loan agreements the plaintiffs had signed were unenforceable because they essentially charged a higher interest rate than that permitted under Florida law.

United States contract law

Contract law regulates the obligations established by agreement, whether express or implied, between private parties in the United States. The law of contracts varies from state to state; there is nationwide federal contract law in certain areas, such as contracts entered into pursuant to Federal Reclamation Law.

AT&T Mobility v. Concepcion, 563 U.S. 333 (2011), is a legal dispute that was decided by the United States Supreme Court. On April 27, 2011, the Court ruled, by a 5–4 margin, that the Federal Arbitration Act of 1925 preempts state laws that prohibit contracts from disallowing class-wide arbitration, such as the law previously upheld by the California Supreme Court in the case of Discover Bank v. Superior Court. As a result, businesses that include arbitration agreements with class action waivers can require consumers to bring claims only in individual arbitrations, rather than in court as part of a class action. The decision was described by Jean Sternlight as a "tsunami that is wiping out existing and potential consumer and employment class actions" and by law professor Myriam Gilles as "the real game-changer for class action litigation". By April 2012, Concepcion was cited in at least 76 decisions sending putative class actions to individual arbitration. After the decision, several major businesses introduced or changed arbitration terms in their consumer contracts, although the hypothesis of massive adoption of consumer arbitration clauses following the decision has been disputed.

Arbitration in the United States is governed by the Federal Arbitration Act of 1925, which requires courts to compel parties who agree to arbitration to participate in binding arbitration, the decision from which is binding upon the parties. Since the passage of the FAA, both state and federal courts have examined arbitration clauses, as well as other statutes involving arbitration clauses, for validity and enforceability.

Green Tree Financial Corp-Ala. v. Randolph, 531 U.S. 79 (2000), is a decision by the United States Supreme Court. The case dealt with the enforceability of arbitration agreements that did not discuss the cost of the arbitration itself and with the finality of certain arbitration decisions.

Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001), was a United States Supreme Court case that concerned whether the "section one exemption" of the Federal Arbitration Act applied to an employment contract of an employee at Circuit City Stores. The Court held that the exemption was limited to the specific listing of professions contained in the text. This decision meant that general employment contracts, like the one Adams sued under, would have to be arbitrated in accordance with the federal statute.

Discover Bank v. Superior Court is a 2005 case where the California Supreme Court ruled that an arbitration clause was unenforceable because a class-action waiver contained within it would exculpate Discover Bank from liability for wrongdoing involving small sums of damages.

14 Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009), is a US labor law case in the United States Supreme Court on the rights of unionized workers to sue their employer for age discrimination. In this 2009 decision, the Court decided that whenever a union contract "clearly and unmistakably" requires that all age discrimination claims under the Age Discrimination in Employment Act of 1967 (ADEA) be decided through arbitration, then employees subject to that contract cannot have those claims heard in court.

Disputes between consumers and businesses that are arbitrated are resolved by an independent neutral arbitrator rather than in court. Although parties can agree to arbitrate a particular dispute after it arises or may agree that the award is non-binding, most consumer arbitrations occur pursuant to a pre-dispute arbitration clause where the arbitrator's award is binding.

DIRECTV, Inc. v. Imburgia, 577 U.S. ___ (2015), was a case in which the Supreme Court of the United States clarified when arbitration provisions in contracts are governed by the Federal Arbitration Act. In a 6-3 opinion written by Justice Stephen Breyer, the Court reversed a decision by the California Court of Appeal that refused to enforce an arbitration agreement between DIRECTV and its customers. The California Court had ruled that the arbitration agreement was unenforceable because, under applicable California law, a class action arbitration waiver between DIRECTV and its customers was unenforceable. However, the Supreme Court of the United States held that the California Court of Appeal's interpretation was preempted by the Federal Arbitration Act, and the California Court of Appeal was therefore required to enforce the arbitration agreement.

Epic Systems Corp. v. Lewis, 584 U.S. ___ (2018), was a case decided by the Supreme Court of the United States on how two federal laws, the National Labor Relations Act (NLRA) and the Federal Arbitration Act (FAA), relate to whether employment contracts can legally bar employees from collective arbitration. The Supreme Court had consolidated three cases, Epic Systems Corp. v Lewis, Ernst & Young LLP v. Morris (16-300), and National Labor Relations Board v. Murphy Oil USA, Inc. (16-307). In a 5-4 decision issued in May 2018, the Court ruled that arbitration agreements requiring individual arbitration are enforceable under the FAA, regardless of allowances set out within the NLRA.

Non-solicitation, in contract law, refers to an agreement, typically between an employer and employee, that prohibits an employee from utilizing the company's clients, customers, and contact lists for personal gain upon leaving the company.

References

  1. ↑ Armendariz v. Foundation Health Psychcare, 6 P.3d 669 (Cal. 2000), 24 August 2000, accessed 3 November 2017
  2. ↑ Ayres, I. & Speidel, R.E., Studies in Contract Law, Seventh Edition, Foundation Press, New York, NY: 2008, p. 584
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