Opinion ID: 1195306
Heading Depth: 1
Heading Rank: 7

Heading: The Without Cause Termination Provision in Dr. Potvin's Contract with MetLife Should Be Enforced

Text: Dr. Potvin's contract with MetLife provided that it could be terminated by either party `at any time, with or without cause, by giving thirty (30) days prior written notice to the other party' (maj. opn., ante, 95 Cal.Rptr.2d at p. 499, 997 P.2d at p. 1155), and MetLife properly invoked that provision in terminating Potvin's preferred provider status. Therefore, as the majority notes, MetLife contends that even if removal of a physician from its preferred provider lists is subject to the common law right to fair procedure, Potvin waived that right by agreeing that MetLife could terminate the preferred provider arrangement without cause. In rejecting this contention, the majority declares the without cause termination provision of Potvin's contract with MetLife unenforceable to the extent it purports to limit an otherwise existing right to fair procedure under the common law. (Maj. opn., ante, at p. 506, 997 P.2d at p. 1162.) The analytical journey by which the majority comes to this remarkable conclusion is as abrupt as it is misconceived. After citing one out-of-state case, the majority contents itself with the observation that California courts, too, are loathe to enforce contract provisions offensive to public policy. ( Kreamer v. Earl (1891) 91 Cal. 112, 117, 27 P. 735 [`No court will lend its aid to give effect to a contract which is illegal, whether it violate the common or statute law, either expressly or by implication.' ]; accord, Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 381, 33 Cal.Rptr.2d 63, 878 P.2d 1275.) (Maj. opn., ante, 95 Cal. Rptr.2d at p. 506, 997 P.2d at pp. 1161-1162.) To the contrary: Historically, this court has been reluctant to declare contractual provisions void or unenforceable on public policy grounds without firm legislative guidance. ( Santisas v. Goodin (1998) 17 Cal.4th 599, 621, 71 Cal.Rptr.2d 830, 951 P.2d 399.) Insofar as the Legislature has provided guidance on the subject of at-will termination provisions, and it has in the context of employment contracts, it has made such provisions generally enforceable. An employment, having no specified term, may be terminated at the will of either party on notice to the other. (Lab.Code, § 2922.) In Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, 610 P.2d 1330, this court created a narrow exception to this rule by recognizing that an employer's right to discharge an at-will employee is subject to limits that fundamental public policy imposes. However, as we subsequently explained, employees who assert Tameny claims must show that the important public interests they seek to protect are tethered to fundamental policies that are delineated in constitutional or statutory provisions. ( Gantt v. Sentry Insurance, supra, 1 Cal.4th at p. 1095, 4 Cal. Rptr.2d 874, 824 P.2d 680 (Gantt ).) The reason for our reticence is clear. [T]he policy of the state is not created by the judicial department, although the judicial department may be called upon at times to declare it; it can be ascertained only by reference to the constitution and laws passed under it, or, which is the same thing, to the principles underlying and recognized by the constitution and laws. ( Lux v. Hoggin (1886) 69 Cal. 255, 307-308, 4 P. 919.) [M]any courts have cautioned against recklessness in condemning contracts as being against public policy. Thus it has been said by an English judge that public policy is an unruly horse astride of which one may be carried into unknown paths. ( Southern Pacific R.R. Co. v. Stibbens (1930) 103 Cal.App. 664, 680, 285 P. 374.) So what authority does the majority rely upon in impliedly repudiating this cardinal principle of judicial restraint? A 110-year-old case Kreamer v. Earl, supra, 91 Cal. 112, 27 P. 735 (Kreamer). Actually, Kreamer looked to the Constitution and statutes of this state in determining that it would be contrary to public policy to enforce a land sale contract. The contract was in contravention of the state constitutional provision that `lands belonging to this state which are suitable for cultivation shall be granted only to actual settlers, and in quantities not exceeding 320 acres to each settler.' (Id, at pp. 117-118, 27 P. 735.) There is no doubt that the contract contravenes the spirit and policy of the land laws of this state.... It is not necessary that the act itself, or any other act, should declare in express words such a contract to be void. If, upon a review of all the state legislation upon the subject, such a contract appears to contravene the design and policy of the laws, a court of equity will not enforce it. (Id. at pp. 116-117, 27 P. 735.) It was in this context that the Kreamer court made the statement upon which the majority relies. `No court will lend its aid to give effect to a contract which is illegal, whether it violate the common or statute law, either expressly or by implication.' (Damrell v. Meyer [(1870)] 40 Cal. [166,] 170 [1870 WL 889].) (Id. at p. 117, 27 P. 735.) Parenthetically, I do not tax the majority with the error, but as a matter of editorial curiosity, the statement that the Kreamer court purports to quote from Damrell v. Meyer nowhere appears in Damrell. More substantively, I note that Damrell refused to enforce a contract that it found to be in direct contravention of the express provision of the Pre-emption Act. (Damrell, supra, 40 Cal. at p. 170.) Damrell, then, like Kreamer, is perfectly consistent with the principle that the majority now repudiatesthat a court should not refuse to enforce a contract as being contrary to public policy unless that policy is clearly expressed in constitutional or statutory provisions. The out-of-state case upon which the majority relies is Harper v. Healthsource New Hampshire, Inc. (1996) 140 N.H. 770, 674 A.2d 962 (Harper) . (Maj. opn., ante, 95 Cal.Rptr.2d at p. 506, 997 P.2d at p. 1161.) Upon examination, Harper provides little support for the majority's refusal to enforce the without cause termination clause of Potvin's contract with MetLife. Harper is distinguishable because California law differs from New Hampshire's in three respects that are critical to the decision in that case. First, the New Hampshire Supreme Court has carved out exceptions to the common law employment-at-will doctrine, noting that in some cases `the employer's interest in running his business as he sees fit must be balanced against the interest of the employee in maintaining his employment, and the public's interest in maintaining a proper balance between the two.' [Citations.] ( Harper, supra, 674 A.2d at pp. 964-965.) In California, on the other hand, the common law employment-at-will doctrine has been reinforced by statute (Lab.Code, § 2922), and this court has not carved out the exception upon which the Harper court relied. Second, in New Hampshire [t]he public policy to which a court may refer [in refusing to enforce a contract] may be statutory or nonstatutory in origin. ( Harper, supra, 674 A.2d at p. 965.) By contrast, this court, as I have just explained, is generally reluctant to declare contractual provisions void or unenforceable on public policy grounds without firm legislative guidance ( Santisas v. Goodin, supra, 17 Cal.4th at p. 621, 71 Cal.Rptr.2d 830, 951 P.2d 399), and we have specifically held that exceptions to the employment-at-will doctrine must be tethered to fundamental policies that are delineated in constitutional or statutory provisions ( Gantt, supra, 1 Cal.4th at p. 1095, 4 Cal.Rptr.2d 874, 824 P.2d 680). Third, Harper relied upon an expression of policy by the New Hampshire Legislature that preferred provider agreements must be `fair and in the public interest.' ( Harper, supra, 674 A.2d at p. 966.) No similar expression of policy by the California Legislature has been brought to our attention. Finally, the Harper court emphasized that the rule it was declaring does not eliminate a health maintenance organization's contractual right to terminate its relationship with a physician without cause. ( Harper, supra, 674 A.2d at p. 966.) Rather, under the Harper rule, a physician terminated pursuant to a without cause provision is entitled to review only if the physician believes that the decision to terminate was, in truth, made in bad faith or based upon some factor that would render the decision contrary to public policy. (Ibid.) Indeed, under the Harper rule, the without cause termination provision of MetLife's contract with Dr. Potvin should be enforced because there is no showing that MetLife's decision was made in bad faith or based upon some other factor that would render the decision contrary to public policy. (Ibid.) Certainly it is not contrary to public policy for a business enterprise to seek to minimize its costs. Any successful business must do so, and in this era of spiraling health care costs, health care providers have a special societal responsibility to do so. (In enacting the Knox-Keene Health Care Service Plan Act of 1975 (Stats.1975, ch. 941, § 2, p. 2071), for example, the Legislature stated that one of its goals was providing the best possible health care for the public at the lowest possible cost by transferring the financial risk of health care from patients to providers. (Health & Saf.Code, § 1342, subd. (d), italics added.)) For a medical insurer, physician services are one of its principal costs, and for physicians, malpractice insurance is one of their principal costs. Therefore, to be competitive, a medical insurer would be wise to restrict its preferred provider lists to physicians with better than average malpractice histories, and, by his own admission, Dr. Potvin's malpractice history was considerably worse than average. In conclusion, the judgment of the trial court granting MetLife's motion for summary judgment should have been affirmed. BAXTER, J., and CHIN, J., concur.