Opinion ID: 2609748
Heading Depth: 1
Heading Rank: 4

Heading: Under established common law precedents, the proscription of arbitrary rejections prohibits rejection pursuant to an unfair procedure as well as rejection based on an improper reason.

Text: In our initial Pinsker opinion we held that in light of the special position occupied by defendant organizations in the professional field of orthodontics an applicant for membership has a judicially enforceable right to have his application considered in a manner comporting with the fundamentals of due process, including the showing of cause for rejection.  (Italics added; Pinsker v. Pacific Coast Soc. of Orthodontists, supra, 1 Cal.3d 160, 166 [hereafter Pinsker I ].) Defendants contend that under this holding judicial review is limited to determining whether there was cause for rejection, that is, whether the applicant was rejected for an accepted noncapricious reason. Because Pinsker I did not explicitly elaborate a requirement of a fair decision-making procedure, defendants claim that they need only demonstrate that as a substantive matter the reason for Pinsker's rejection was not irrational. In other words, defendants initially claim that they were under no legal constraints to follow a fair procedure in determining whether or not to exclude Pinsker from their organizations. This attempt to confine our prior holding to matters of substantive nonarbitrariness, however, ignores the entire body of common law precedents [7] upon which Pinsker I rests. As we shall explain, these authorities recognize that an organization's decision to expel or exclude an individual may be arbitrary either because the reason underlying the rejection is irrational or because the organization has proceeded in an unfair manner. (1) Taken together, these decisions establish the common law principle that whenever a private association is legally required to refrain from arbitrary action, the association's action must be both substantively rational and procedurally fair. A review of the cases makes this overriding principle abundantly clear. In Falcone v. Middlesex County Medical Soc. (1961) 34 N.J. 582 [170 A.2d 791, 89 A.L.R. 952], the seminal decision in this country granting judicial review of a professional association's rejection of an application for membership, the court canvassed the historical development of judicial decisions in this entire field. The Falcone court observed that while courts in general have been understandably reluctant to interfere with the internal affairs of membership associations ... in particular situations, where the considerations of policy and justice were sufficiently compelling judicial scrutiny and relief were not found wanting. (170 A.2d at p. 796.) As the Falcone court noted, the earliest common law response came in situations involv[ing] improper expulsions from pre-existing membership which called forth judicial directions for reinstatement or other suitable relief. (Italics added; id. ) [8] The Falcone court proceeded to explain that the common law principle of judicial review of expulsions from membership associations had developed, in more recent years, to encompass a comparable judicial scrutiny of exclusions from membership in a special, limited category of private associations such as labor unions or professional and trade associations. Because of their monopolistic position in a given field of employment, such organizations wield enormous power, and for an individual seeking to make a living in a given trade or profession, membership in such organizations is frequently an economic necessity. As Falcone recognized, one of the earliest and most influential decisions applying common law principles to a private association's exclusion from membership was Chief Justice Gibson's celebrated opinion for this court in James v. Marinship Corp. (1944) 25 Cal.2d 721 [155 P.2d 329, 160 A.L.R. 900], invalidating a labor union's policy of excluding blacks from full membership. In Marinship our court declared: Where a union has ... attained a monopoly of the supply of labor ... such a union occupies a quasi public position similar to that of a public service business and it has certain corresponding obligations. It may no longer claim the same freedom from legal restraint enjoyed by golf clubs or fraternal associations. Its asserted right to choose its own members does not merely relate to social relations; it affects the fundamental right to work for a living. [Citation.] (25 Cal.2d at p. 731.) [9] Finding the underlying rationale of Marinship applicable to a medical society that enjoyed a virtual monopoly over the use of local hospital facilities, the Falcone court upheld the propriety of judicial review of the medical society's rejection of the application of a physcian for membership. After undertaking such review, the court decided that the society's ground for exclusion must be viewed as patently arbitrary and unreasonable and beyond the pale of the law. (170 A.2d at p. 800.) Our decision in Pinsker I represents our most recent application of the general common law principles which originated in the association expulsion cases and which through Marinship, Falcone and similar authorities, [10] have been applied to the exclusion of members by public service organizations. (See Tobriner & Grodin, The Individual and the Public Service Enterprise in the New Industrial State (1967) 55 Cal.L.Rev. 1247, 1256-1260.) In Pinsker I we concluded that although membership in defendant orthodontic associations could not be said to be an economic necessity, the associations still wielded monopoly power and affected sufficiently significant economic and professional concerns so as to clothe the societies with a public interest. [11] Thus, Pinsker I constitutes only the latest development in a century-old progression of common law decisions establishing the proper role which courts should play with respect to membership decisions reached by private associations. Throughout this progression, the authorities indicate that once it is determined that judicial scrutiny of a particular decision is justified to protect against arbitrary action, such overview includes an evaluation of both the substantive and procedural aspects of the association's decision. (See generally Chafee, The Internal Affairs of Associations Not for Profit (1930) 43 Harv.L.Rev. 993, 1014-1020.) California decisions clearly illustrate the dual nature of this review. In situations involving the expulsion of members from a society, the courts have long held that procedural fairness is an indispensible prerequisite. (2) In this state `a member of an unincorporated association may not be suspended or expelled ... without charges, notice and a hearing, even though the rules of the association make no provision therefor.' ( Swital v. Real Estate Commissioner, supra, 116 Cal. App.2d 677, 679; Cason v. Glass Bottle Blowers Assn., supra, 37 Cal.2d 134, 143-144.) This requirement of procedural fairness has been an established part of the California common law since before the turn of the century. (See, e.g., Von Arx v. San Francisco G. Verein, supra, 113 Cal. 377; Otto v. Tailors P. & B. Union, supra, 75 Cal. 308, 314-315.) In addition to requiring a fair procedure, the common law decisions establish that an expulsion from an association cannot properly rest upon a rule which is substantively capricious or contrary to public policy. Thus, for example in Bernstein v. Alameda etc. Med. Assn. (1956) 139 Cal. App.2d 241 [293 P.2d 862], the court held that the defendant medical society could not lawfully expel a doctor for making disparaging statements about another doctor's professional work in the course of legal proceedings. (See also Higgins v. American Society of Clinical Pathologists (1968) 51 N.J. 191 [238 A.2d 665, 671]; Spayd v. Ringing Rock Lodge No. 665 (1921) 270 Pa. 67 [113 A. 70, 14 A.L.R. 1443]; Hurwitz v. Directors Guild of America, Inc. (2d Cir.1966) 364 F.2d 67, 73-77.) Defendants concede that courts have applied this dual-pronged analysis in reviewing expulsion decisions but contend that in the exclusion area courts have confined their review of arbitrariness to substantive matters, and have not required compliance with procedural fairness. Defendants apparently rely on the fact that in both the Marinship and Falcone cases the arbitrariness issue arose in a substantive context. The authorities, however, belie the defendants' claim that the requirement of procedural fairness adheres only in expulsion cases. In Wyatt v. Tahoe Forest Hospital Dist., supra, 174 Cal. App.2d 709, for example, the court invalidated the rejection of a doctor's application for membership on a hospital staff because the hospital had failed to afford the applicant any opportunity to be heard. And in Martino v. Concord Community Hosp. Dist., supra, 233 Cal. App.2d 51, 56-57, the court reiterated the Wyatt holding and extended its requirement of procedural fairness to a situation in which an application for staff membership had simply been deferred rather than rejected. Although the Wyatt and Martino cases involve rejections of membership for a hospital staff rather than for a professional association, in view of the fiduciary responsibilities imposed on the defendant associations because of their public service functions, the prior cases are not distinguishable from the present matter. In each instance, the courts uphold judicial review because denial of membership would effectively impair the applicant's right to fully practice his profession. (174 Cal. App.2d at p. 715. Cf. Rosner v. Eden Township Hospital Dist. (1962) 58 Cal.2d 592, 598 [25 Cal. Rptr. 551, 375 P.2d 431].) [12] Moreover, several recent out-of-state authorities provide additional support for the conclusion that defendants' membership decisions must be rendered pursuant to fair procedures. In Blende v. Maricopa County Medical Society (1964) 96 Ariz. 240 [393 P.2d 926], for example, the Arizona Supreme Court held that if a medical society's denial of a doctor's application for membership would impair the physician's practice of his profession then his membership application may not be denied arbitrarily, but only on a showing of just cause established by the Society under proceedings embodying the elements of due process.  (Italics added; 393 P.2d at p. 930; see also Sussman v. Overlook Hospital Assn., supra, 95 N.J. Super. 418; Silver v. Castle Memorial Hospital, supra, 53 Hawaii 475.) Our decision in Pinsker I drew upon the foregoing authority in concluding that an applicant for membership [in defendant organizations] has a judicially enforceable right to have his application considered in a manner comporting with the fundamentals of due process, including the showing of cause for rejection. (Italics added; 1 Cal.3d at p. 166.) The development of the common law, reviewed above, buttresses the proposition evident from the very language of Pinsker I : a showing of cause for rejection is but one of the requirements of a nonarbitrary decision. In addition, an applicant for membership in defendant societies is entitled to have his application decided pursuant to a fair procedure. (See generally Sloss, Procedural Due Process in Voluntary Associations (1973) 48 State Bar J. 138.)