Burks v. Kaiser Foundation Health Plan, Inc.
Filed March 5, 2008, Third District
Cite as 2008 SOS 1462

Nullity of Arbitration Provision Affirmed

The issue of the case stemmed from a lawsuit filed by Bernard Burks against Kaiser Foundation Health Plan, Inc. (Kaiser) for “the egregious treatment [he] received from Kaiser while suffering from a renal failure and awaiting a kidney transplant.”

As a response, Kaiser petitioned to compel arbitration under the arbitration provision in the membership agreement between Burks and Kaiser.

Burks opposed Kaiser’s petition on the ground that the arbitration provision was unenforceable because the disclosure of the provision in Kaiser’s enrollment form - as required by Health and Safety Code section 1363.1 - was not “prominently displayed” on the form as required by subdivision (b) of that statute.

As seen on the document, Kaiser’s enrollment application / change form was a single page consisting mostly of blank spaces in which Burks supplied his personal identifying information. The blank spaces appeared in a large box defined by bold lines on all four sides.

The arbitration disclosure was a single paragraph of small text below that box, immediately above the line for Burks’s signature. The paragraph had “no heading and was not highlighted”.

After trial, the trial court agreed with Burks, and denied Kaiser’s petition. Kaiser appealed.

During appeal, the Third District court of appeals affirmed the trial court decision, holding that the disclosure was not displayed as required by statute.

The court explained that prominent meant something commanding notice by standing out from its surroundings or background. It noted that Kaiser’s disclosure was not prominent by virtue of its placement just above Burks’s signature line, since its placement there was required by section 1363.1(d).

By requiring prominence in addition to placement immediately above the signature line, the law intended to “require something more than placement to make the notice prominent”.

In addition, the court noted that the disclosure, as Kaiser contended, was plainly separated from the rest of the form by a solid horizontal border. The solid border was actually the bottom of the box enclosing the blanks Burks was required to fill out.

Although the arbitration notice was the only block of text on the form, it was not sufficient enough to stand out from its surroundings because the rest of the form contained larger typeface, some of which was bold, or was highlighted by a differently colored background.

The court therefore rejected Kaiser’s arguments that its disclosure substantially complied with the statute. Instead the court ruled that Kaiser’s failure to prominently display the arbitration disclosure on its enrollment form could never be considered “a mere technical imperfection of form”.

Further , the court ruled that the form did not substantially comply with the requirement of the statute and was therefore unenforceable.

The Third Appellate District affirmed an order which held that the disclosure of an arbitration provision in the enrollment form of a health care service plan that was printed in the same typeface used in the rest of the form was not prominently displayed within the meaning of Health & Safety Code section 1363.1(b).