Court Voids "Unconscionable"
Stephen Barrett, M.D.
A small claims court judge has voided the contract between chiropractor Donald E. Harte and his former patient, Gertrude West, who sued Harte in Marin County, California. Documents in the case indicate that West, a retired attorney, had sought help for knee pain but was advised to have intensive care for “subluxation degeneration” of her spine. She contracted for 100 visits with a discount for advance payment but severe penalties for discontinuing. After 49 visits over a 4-month period, she concluded that she was not being helped and asked that payment for the unused visits be refunded. When Harte refused, she filed suit. The judge concluded that (a) West had been misled, (b) the penalty clause was "unconscionable," and (c) West was entitled to a $6,401 refund, plus the cost of the suit. Harte appealed the ruling, asserting that the contract was enforceable and that he was entitled to reasonable compensation for services rendered. The small claims appeal judge reduced the award to $4,589.00 plus costs of $75.00. The judge did not explain how he decided what was "reasonable," but he clearly agreed that the contract was not.
In 1989, to settle charges that he had fraudulently billed insurance companies, Harte pled guilty to three counts of grand theft and two counts of petty theft and was ordered to pay more than $36,000 in fines, restitution, and investigative costs. in 1991, the California Board of Chiropractic Examiners responded to Harte's conviction by placing him on five years' probation. In 1996, he settled probation violation charges by agreeing to extension of his probation followed by revocation of his license if he failed pay $2,500 of his previously assessed investigative costs by mid-1997.
MARIN COUNTY SUPERIOR COURT
West v. Harte, D.C.
This was a small claim wherein plaintiff seeks to recover all of the fees she paid defendant for his chiropractic services. Without setting forth in full the testimony presented by both side, including declarations and exhibits, plaintiff contends that she suffers from serious pain and discomfort in her arthritic knees and that surgery had not resolved those problems. Plaintiff contends that she was induced to begin treatment with defendant because of his deceptive, misleading if not fraudulent advertising regarding what his chiropractic services could do. She explained to defendant the purpose of her visit (her knees). He had her undergo a full body x-ray which she contends was not medically prudent. He did not take x-rays of her knees which was the principal reason she sought his services. He advised her that she had severe degenerative discs in her neck and spine which required long term treatment utilizing his chiropractic services. Plaintiff contends defendant improperly induced her to sign his contract through fear and intimidation and/or misrepresentations regarding his services. She gave him an advance fee of $6,354 for 100 visits plus $47 for the initial examination. Within the contract was a provision that if plaintiff terminated defendant's services he was entitled to withhold 10% of the $6,354 as an administrative fee. Plaintiff began using defendant's services in March 2008. She contends that these adjustments did not improve her condition. He insisted that she do more treatments. Finally, in August 2008 after no real improvement she advised defendant that she was discontinuing his services and requested a refund of the remaining balance of her unused fees. Plaintiff contends that defendant refused her request for a partial refund because he claimed that she had violated another provision of the contract by failing to adhere to the number of recommended weekly visits. Plaintiff has provided several declarations from health care providers who she contends support her position that defendant has engaged in unethical practices. Plaintiff also contends that defendant has been previously disciplined by the California Board of Chiropractic Examiners for similar misleading advertisements. Plaintiff seeks to recover all of the fees ($6,401) that she paid defendant.
Defendant put forth several defenses:
(1) he initially determined plaintiffs need for adjustments through diagnostic tests including x-rays and the Insight Subluxation Station. These diagnostic tests revealed that plaintiff suffers from degenerative disc disease. He does not "treat" this or any skeletal condition but seeks to improve the patient's naturally healing process through a series of chiropractic adjustments over a period of time. This form of alternative treatment is not unique or radical within the chiropractic community;
(2) Plaintiff was not under any duress when she signed the contract which sets forth all of the terms and fees associated with his services. Plaintiff breached the contract because she did not maintain the scheduled number of visits recommended for her after his diagnosis. Defendant, on the other hand, has kept to his end of the contract by treating plaintiff appropriately;
(3) The California Board of Chiropractic Examiners did not take any disciplinary action against defendant as alleged by plaintiff;
(4) Defendant has not engaged in any false or misleading advertisement in order to get plaintiff, or anyone else, to utilize his services . He denies that plaintiff is entitled to any refund as she breached the contract.
The Court, having reviewed the numerous documents, exhibits, declarations1 and the testimony of the parties finds the following: California appellate decisions have generally held that there exists a confidential relationship between a patient and a physician. This relationship is considered to be one based upon the "trust and confidence" that a patient reposes in his or her physician when it comes to the care and treatment of the patient. Thus, the California Supreme Court has held that the scope of a physician's duty to disclose medical information to his or her patients in discussing proposed medical procedures has certain basic characteristics: "The first is that patients are generally persons unlearned in the medical sciences and therefore, except in rare cases, courts may safely assume the knowledge of patient and physician are not in parity. The second is that a person of adult years and in sound mind has the right, in the exercise of control over his own body, to determine whether or not to submit to lawful medical treatment. The third is that the patient's consent to treatment, to be effective, must be an informed consent. And the fourth is that the patient, being unlearned in medical sciences, has an abject dependence upon and trust in his physician for the information upon which he relies during the decisional process, thus raising an obligation in the physician that transcends arms-length transactions." Cobbs v. Grant (1972) 8 Cal.3d 229, 242.) In Cobb, the Supreme Court went on to conclude that "as an integral part of the physician's overall obligation to the patient there is a duty of reasonable disclosure of the available choices with respect to proposed therapy and of the dangers inherently and potentially involved in each." (Cobb v. Grant supra at p. 243.)
1Both parties have submitted ex parte letters to the court following the trial. These attempted communications are improper and were not considered by the Court in reaching this decision.
Although Cobb and other appellate decisions discuss this relationship only in the context of a physician and patient, there appears little or no reason in logic why those same characteristics do not exist between a chiropractor and his or her patient. The Court finds therefore that there did exist between plaintiff and defendant a confidential relationship and that plaintiff was dependent upon and placed her trust and confidence in defendant's diagnosis and recommendation for 100 prepaid chiropractic visits. The Court finds that the basis of defendant's recommendation to plaintiff of the necessity that she undergo 100 chiropractic visits (or adjustment) was unsupported by substantial or convincing evidence and/or that the Court finds defendant improperly misled and/or induced plaintiff into signing up for 100 chiropractic treatments or adjustment for the relief of the debilitating pain in her knees for which she sought defendant's services in the first place.
The Court also finds the provision within defendant's contract that plaintiff was required to adhere to the treatment schedule in order to obtain a partial refund of any unused portion of her advanced payment was an unconscionable provision within the meaning of Civil Code § 1670.5. Accordingly, and pursuant to 1670.5 the Court deletes that provision from defendant's contract as unenforceable.
With regard to the term of defendant's contract that entitled him to retain 10% of the total advanced payment as an administrative cost, the Court finds that this provision was in the manner of a liquidated damages provision. The California Supreme has examined such provisions and has held: "[A] liquidated damages clause will generally be considered unreasonable, and hence unenforceable under section 1671 (b), if it bears no reasonable relationship to the range of actual damages that the parties could have anticipated would flow from a breach. The amount set as liquidated damages" must represent the result of a reasonable endeavor by the parties to estimate a fair average compensation for any loss that may be sustained." (Garrett v. Coast & Southern Fed. Sav. & Loan Assn., supra, 9 Cal.3d at p. 739, 108 Cal. Rptr. 845, 511 P.2d 1197.) A penalty provision operates to compel performance of an act [ citation] and usually becomes effective only in the event of default [citation] upon which a forfeiture is compelled without regard to the damages sustained by the party aggrieved by the breach [citation]. The characteristic feature of a penalty is its lack of proportional relation to the damages which may actually flow from failure to perform under a contract. [Citations.]" (Ridgley v. Topa Thrift & Loan Association (1998) 17 Cal. 4th 970, 977.). "The law traditionally disfavors forfeitures and statutes (and contracts) imposing them are to be strictly construed."(People v. United Bonding Ins. Co. (1971) 5 Cal.3d 898, 906, 98 Cal.Rptr. 57, 62, 489 P.2d 1385, 1390; and see Irwin v. Irwin (1977) 69 Cal.App.3d 317, 322, 138 Cal.Rptr. 9.) "Of two or more possible constructions, 'the construction which avoids forfeiture should be favored.'" The Court also finds that defendant himself acknowledged at trial that this 1 0% fee was intended by him as a penalty to reinforce to his patients the importance of their continuing in treatment. The Court has concluded from the evidence presented that defendant's 10% cancellation fee bore no relationship to any "administrative costs" associated with such cancellation and is therefore unenforceable under California law as a penalty.
Lastly, although defendant did not raise the defense that his contract (paragraph 6) contains a binding arbitration clause to resolve any dispute with his patients, that provision also fails to comply with the statutory requirements of California Code of Civil Procedure §1295 and would have been unenforceable in any event.
Based upon all of the evidence the Court finds that plaintiff has sustained her burden of proof that she was misled by defendant into signing the contract and/or agreeing to 100 visits for pain in her knees and that she is entitled to a full refund of all fees paid to defendant. The Court also has found that provisions of defendant's contract are unenforceable under California law. Judgment for Plaintiff for $6,401.00 plus costs of suit.
Commissioner Harvey E. Goldfine
February 19, 2009
This page was revised on May 24, 2009.