Denying All Discovery In Arbitration Of Professional Malpractice Claims Is Unconscionable.
Surgery scalpels. 1878. Library of Congress.
The Second District, Division Four, has affirmed the trial court’s finding of unconscionability, but concludes that unconscionability may be cured through severance in an arbitration of professional malpractice claims. Lateral Link Group v. BLA Schwartz, Case No. B253862 (2/4 Oct. 31, 2014) (Collins, Willhite, Manella) (unpublished).
The unconscionability problem arose here because the retainer agreement containing the arbitration clause included the proviso, “except that in no event will the parties be entitled to conduct pre-hearing discovery.” The Court agreed that this carve-out resulted in a high degree of substantive unconscionability, because it greatly favored the attorneys over their clients. Though the plaintiffs were entitled to their client files, they could be denied access “to other essential documents and witnesses,” whereas the attorneys would have “the bulk of such documents and records.” The problem created by the discovery prohibition was compounded by a good faith meet-and-confer procedure requiring plaintiffs to disclose the basis of any claim against defendants before arbitrating. The Court labeled the resulting problem as one of “informational asymmetry.”
Interestingly, the lack of discovery also magnified problems of procedural unconscionability, because it clashed with the incorporation of AAA Commercial Rules giving arbitrators the right to control discovery.
Because the root of the unconscionability problem derived from the single phrase denying discovery, the Court concluded that the arbitration agreement was not “permeated” with unconscionability. Using the judicial scalpel, the Court severed the malignant provision – and presto ! – the arbitration agreement survived.
Defendants get to arbitrate, and plaintiffs get discovery.