## Facts

- California created a state-employee health benefits program under the Meyer-Geddes Employees’ Medical and Hospital Care Act, administered by the Board of Administration of the State Employees’ Retirement System.
- The Board contracted with Kaiser to provide medical and hospital benefits to eligible state employees through renewable one-year agreements.
- Terry Madden, a state employee, enrolled in the Kaiser plan offered through the Board.
- The Board and Kaiser later negotiated an amendment adding a clause requiring arbitration of malpractice claims arising under the plan.
- Madden alleged she did not personally negotiate, sign, or receive notice of the arbitration clause and later sued Kaiser in court for malpractice after surgery and related complications.
- Kaiser petitioned to compel arbitration; the trial court denied the petition, and the Court of Appeal affirmed.

## Issues

1. Whether the Board, acting as a representative for state employees in contracting for group medical services, had implied authority to agree to binding arbitration of enrolled employees’ malpractice claims.
2. Whether the arbitration clause was unenforceable as an adhesive or unfair term against an employee who did not expressly consent.
3. Whether enforcing the arbitration clause improperly deprived the employee of the right to a jury trial absent an express waiver.

## Decision

- The California Supreme Court reversed the order denying Kaiser’s petition to compel arbitration.
- The Court held the Board had implied authority to include a malpractice arbitration clause in the group health contract, binding enrolled employees.
- The Court rejected the arguments that the clause was invalid as an adhesion term or that it required an explicit jury-trial waiver.
- The Court directed that the malpractice claims proceed in arbitration as specified by the contract.

## Legal Principles

- An agent’s implied authority includes acts that are “proper and usual” to accomplish the agency purpose; in negotiated group medical contracts, this can include agreeing to arbitration of malpractice claims. (Cal. Civ. Code § 2319)
- Arbitration is a generally accepted and favored dispute-resolution method; its inclusion in commercial or group contracts is not presumptively extraordinary or unauthorized.
- Adhesion doctrine targets terms imposed by superior bargaining power that unfairly limit the stronger party’s duties or liability; a negotiated arbitration clause that primarily changes the forum for resolving disputes, without reducing substantive rights, is generally enforceable.
- An agreement to arbitrate reflects the parties’ intent to resolve covered disputes without a jury; no separate, express jury-trial waiver conforming to Code of Civil Procedure § 631 is required when a valid arbitration agreement exists.

## Conclusion

The court enforced a malpractice arbitration clause added to a state-employee group health plan, holding the state board had implied authority to agree to arbitration on employees’ behalf and that the clause was neither an unenforceable adhesion term nor invalid for lack of an express jury-trial waiver.


Madden v. Kaiser Found. Hosps., 17 Cal. 3d 699, 552 P.2d 1178 (Cal. 1976)