Velyvis v. Adventist Health CA Medical Group CA1/2

Filed 4/13/16 Velyvis v. Adventist Health CA Medical Group CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

JOHN H. VELYVIS,
Plaintiff and Appellant,
A144273
v.
ADVENTIST HEALTH CALIFORNIA (Napa County
MEDICAL GROUP INC., Super. Ct. No. 2662045)
Defendant and Respondent.

Appellant John H. Velyvis, M.D. (Dr. Velyvis) signed a “Physician Employment
Agreement” that provided any unresolved disputes be referred to a retired judge pursuant
to the reference provision in Code of Civil Procedure section 6381. The trial court
ordered Dr. Velyvis’s one remaining dispute to such a judge. The judge heard Dr.
Velyvis’s claim and rejected it. The Napa County Superior Court confirmed that
decision, and entered judgment.
Dr. Velyvis appeals, essentially contending that the matter should never have been
referred, a contention based on two fundamental arguments: (1) the reference provision is
unconscionable and (2) his employer waived its right to the reference. We affirm.
BACKGROUND
The Parties and the Employment Agreement
Dr. Velyvis is an orthopedic surgeon. Respondent Adventist Health California
Medical Group (for consistency with the briefing, CMG) is a professional medical

1
All undesignated statutory references are to the Code of Civil Procedure.

1
corporation that contracts with St. Helena Hospital to provide professional medical
services to its patients.
In July 2010 Dr. Velyvis entered into a “Physician Employment Agreement”
(PEA) with CMG, an agreement that, according to a declaration from CMG’s attorney—a
declaration not rebutted by Dr. Velyvis—went through six drafts. Under the PEA Dr.
Velyvis agreed to provide medical services at the hospital’s outpatient orthopedic clinic
and its orthopedic clinical and research center, including the Coon Joint Replacement
Institute. Dr. Velyvis would receive base income of $600,000 per year, incentive
compensation for certain work performed, a bonus, a benefit package, and some five
weeks of flexible time off (FTO) annually.
Section 7.8 of the PEA, entitled “Dispute Resolution,” provided in its entirety as
follows:
“Dispute Resolution. In the event of any controversy or dispute related to or
arising out of this Agreement, the Parties agree to meet and confer in good faith to
attempt to resolve the controversy or dispute without an adversary proceeding. If the
controversy or dispute is not resolved to the mutual satisfaction of the Parties within five
(5) business days of notice of the controversy or dispute, the Parties agree to waive their
rights, if any, to a jury trial and pre-trial discovery, and to submit the controversy or
dispute to a retired judge or justice pursuant to Section 638(1) of the California Code of
Civil Procedure, or any successor provision, for resolution in accordance with Chapter 6
(References and Trials by Referees), of Title 8 of Part 2 of the California Code of Civil
Procedure, or any successor chapter. The Parties agree that the only proper venue for the
submission of claims is the County of Napa, California, and that the hearing before the
referee shall be concluded within nine (9) months of the filing and service of the
complaint. The Parties reserve the right to contest the referee’s decision and to appeal
from any award or order of any court.”

2
 Dr. Velyvis is Terminated, and Files Suit
On January 25, 2012, CMG sent a letter to Dr. Velyvis advising that his
employment was terminated for cause effective immediately.2 The stated reason for the
termination was “The Group is taking this action as you are not currently, and have not
for some time, been able to fill your obligations to provide the services contemplated by
the Agreement. Moreover, you are in breach of the Agreement in light of your failure to
effectively maintain privileges to perform the types of procedures for which you were
hired.”
On January 31, six days after the termination letter, Dr. Velyvis filed suit against
CMG, alleging five claims, styled as follows: (1) Breach of Contract; (2) Breach of the
Covenant of Good Faith and Fair Dealing; (3) Wrongful Discharge in Violation of Public
Policy; (4) Breach of Labor Code Section 970; and (5) Unlawful Business Practices
(Bus. & Prof. Code §17200 et seq.) (the wrongful discharge case).
What, if anything, that occurred in the wrongful discharge case is not in the record
before us, though there is a reference in a declaration below that CMG filed an answer on
February 29, and a reference in a brief that Dr. Velyvis sought a preliminary injunction
compelling his reinstatement that was denied.
What we do know is that by March 6, some five weeks after the wrongful
discharge case was filed, it was settled, as by that date the parties had entered into a
“Settlement Agreement and Mutual Release.” The essence of the settlement was that Dr.
Velyvis would receive $380,000, in exchange for which all claims would be released and
the wrongful discharge case dismissed.
Despite agreeing to the settlement, later on March 6, Dr. Velyvis’s attorney
advised CMG’s attorney that Dr. Velyvis believed CMG had not paid him for accrued but
unused FTO. CMG’s attorney responded that according to CMG’s records, it appeared
CMG had compensated Dr. Velyvis for all FTO. Dr. Velyvis’s attorney persisted, so
CMG reluctantly agreed to “carve out” from the settlement the FTO issue. However,

2
Despite this, CMG agreed to pay Dr. Velyvis through January 31.

3
CMG’s counsel said he “made it clear to [Dr. Velyvis’s attorney] during our phone
conversation that, in light of the substantial six-figure settlement amount and CMG’s
demand for an all-encompassing release from Dr. Velyvis, the carve out covered only the
value of any accrued but unused FTO; it did not include additional damages, such as
waiting time penalties, which were explicitly included in the release.”
In short, the parties agreed to “carve out” from the settlement the FTO issue, the
releasing language in the final settlement agreement ending with this: “Notwithstanding
the foregoing, PLAINTIFF does not release any claim he may have for accrued but
unpaid PTO.”3
The next day, March 7, CMG’s attorney sent to Dr. Velyvis’s attorney what he
represented were all records of Dr. Velyvis’s accrual of FTO, all of which had been
signed by Dr. Velyvis (and most by his practice manager, Freda Barney). The
accompanying e-mail stated as follows: “It appears Dr. Velyvis is misinformed regarding
his PTO accrual/use. The attached documents show he used all his accrued PTO (and
then some) prior to the termination of his employment. [¶] I trust this resolves the issue.
If not, please feel free to give me a call.” Indeed, according to CMG, the records showed
Dr. Velyvis’s FTO accrual and usage during each month of his employment and that as of
his termination he had used more FTO than he had accrued.
Dr. Velyvis was not persuaded, and he filed the within action.

3
Apparently the “carve out” of the FTO was not the only last-minute edit to the
settlement agreement. According to the attorney for CMG, after drafting the settlement
agreement, he “learned for the first time that Dr. Velyvis had filed a Chapter 7
bankruptcy proceeding, which he declined to disclose during the settlement negotiations.”
And counsel went on, “Dr. Velyvis initiated the Chapter 7 action in an effort to avoid
paying a $350,000 attorneys’ fees award against him in favor of another of his former
employers, Desert Orthopedic Center (which he also unsuccessfully sued for wrongful
termination). Accordingly, Dr. Velyvis’ claims against CMG were the property of the
bankruptcy estate and the settlement agreement had to be quickly amended to allow for
review and approval by the Bankruptcy Court.”

4
 Dr. Velyvis Files Another Lawsuit
On July 17, 2013, represented by the same counsel as in the wrongful discharge
case, Dr. Velyvis filed the within action, alleging entitlement to accrued but unused FTO
time. Despite that the carve out apparently dealt with a few days of FTO, the complaint
alleged six causes of action: (1) Breach of Contract; (2) Breach of the Covenant of Good
Faith and Fair Dealing; (3) Breach of Labor Code Sections 201, 203, 227.3; (4) Unlawful
Business Practices (Bus. & Prof. Code §17200 et seq.); (5) Interference with Prospective
Economic Advantage; and (6) Inducing Breach of Contract. Not only that, the FTO
complaint named two law firms and two attorneys—attorneys, we note, who had
represented parties adverse to Dr. Velyvis. Those attorney defendants were the firm of
Long & Levit, along with Douglas Melton of that firm, who were CMG’s attorneys in the
wrongful discharge case; and John MacConaghy and the firm of MacConaghy & Barnier,
who were counsel for the trustee in Dr. Velyvis’s Chapter 7 bankruptcy filing.4
On August 1, Dr. Velyvis propounded form employment law interrogatories and
document requests.
On August 27, the attorney defendants filed anti-SLAPP motions to dismiss.
Following full briefing, the trial court, the Honorable Elia Ortiz, granted the anti-SLAPP
motions, and the attorney defendants were dismissed from the case. Mr. MacConaghy
and his firm moved for attorney fees, which Judge Ortiz ordered in the amount of
$19,417.20. Dr. Velyvis appealed from that order, and we affirmed it in an unpublished

4
This is how Dr. Velyvis describes the complaint in his opening brief: “The
wrongful discharge settlement agreement entitled Dr. Velyvis to seek compensation for
the few days of FTO that CMG owed him on his termination pursuant to Labor Code
section 201(a). [Citation.] Although the amount of FTO owed to Dr. Velyvis in this
second matter filed on July 17, 2013 [citation] is not great, Dr. Velyvis is also entitled to
punitive damages of an additional 30 days of compensation as waiting time penalties
pursuant to Labor Code section 203 and attorneys’ fees pursuant to Labor Code sections
218.5 and 1194. [Citation.] The waiting time penalties alone would be more than
$50,000, given an annual base salary of $600,000 [Citation.]” (Fn. omitted.)

5
opinion filed October 28, 2014 (John Velyvis v. John H. MacConaghy et al. (Oct. 28,
2014, A141332)).5

5
Our opinion expressed some dismay about the tone and substance, of Dr.
Velyvis’s brief. For example, we began our discussion section with this:
“We begin by observing Dr. Velyvis’s opening brief is permeated with an
astonishingly intemperate attack on Judge Ortiz. The two captions in his brief read as
follows:
“ ‘I. BACKGROUND: NAPA COUNTY’S BRAND-NEW JUDGE AWARDED
ATTORNEYS’ FEES IN AN ANTI-SLAPP CASE DESPITE THE ABSENCE OF
INFORMATION SHE NEEDED TO CONSIDER OR EXPERIENCE AS A CIVIL
TRIAL JUDGE SO THAT SHE COULD MAKE HER OWN ASSESSMENTS.’
“ ‘II. LEGAL ARGUMENT: THE NEW JUDGE COMING FROM A
CRIMINAL LAW BACKGROUND, WAS NOT AN “EXPERIENCED TRIAL
JUDGE” WHO COULD FILL IN THE MANY GAPS LEFT BY MacCONAGHY’S
REQUEST FOR ATTORNEYS’ FEES.’
“Such conduct is not to be condoned. (See Fink v. Shemtov (2010) 180
Cal.App.4th 1160, 1176.)
“It is unclear whether Dr. Velyvis’s attack is aiming at what he claims is Judge
Ortiz’s inexperience, or incompetence, or bias, but it does not matter. To begin with,
Dr. Velyvis’s attempt to disqualify Judge Ortiz could be reviewed only by petition for a
writ of mandate filed within 10 days of Judge Stone’s decision on December 11, 2013.
(Code, Civ. Proc., § 170.3, subd. (d).) No such petition was filed, and the issue of Judge
Ortiz’s perceived lack of qualifications cannot be raised on this appeal. (PBA, LLC v.
KPOD, Inc. (2003) 112 Cal.App.4th 965, 970-971.) Moreover, insofar as Dr. Velyvis
means to inject Judge Ortiz’s qualifications into her decision to grant defendants’ motion
to strike, that effort is doomed by reason of his statement that he is not attempting to
challenge that ruling—not to mention the additional reason that such order was
appealable (Code Civ. Proc., § 904.1, subd. (a)(13)), and Dr. Velyvis failed to perfect a
timely appeal from it. (Russell v. Foglio (2008) 160 Cal.App.4th 653, 659-661;
Maughan v. Google, Inc. (2006) 143 Cal.App.4th 1242. 1247.) Likewise, Dr. Velyvis’s
argument that Judge Ortiz simply ‘rubberstamped’ defendants’ motion for fees and costs
out of inexperience must be summarily rejected.
“Dr. Velyvis cannot secure reversal by faulting the form of Judge Ortiz’s order.
The order addressed a motion for attorney fees, which does not require judicial
explanation or a statement of decision. (Maria P. v. Riles (1987) 43 Cal.3d 1281, 1294;
Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 67.) Dr. Velyvis’s
arguments that defendants have ‘not established entitlement to the requested attorneys’
fees,’ and that ‘an award of attorneys’ fees and costs requires a judicial finding’ of
entitlement misperceives the nature of section 425.16. Under subdivision (c) of that
statute, as construed by our Supreme Court, ‘any . . . defendant who brings a successful
motion to strike is entitled to mandatory attorney fees.’ (Ketchum v. Moses (2001)

6
 Meanwhile, before the anti-SLAPP motion was heard, CMG responded to the
discovery requests, responding that as to seven categories of documents, “[a]ll responsive
non-privileged documents in Defendant’s care, custody or control will be produced.” In
regard to the remaining unanswered interrogatories and non-production of documents,
Dr. Velyvis’s counsel sent meet and confer letters. And on October 3, CMG promised
that “we are working on gathering responsive documents and will provide supplemental
or amended discovery responses, where necessary, in due course.”
Later, however, by letter on October 22, CMG wrote as follows: “Given the flurry
of activity at the outset of this matter we had not yet had a chance to review the
procedural posture of the case. Upon further review, pursuant to section 7.8 of the
contract between Dr. Velyvis and CMG, the parties agreed to submit any disputes arising
out of the contract to a retired judge or justice pursuant to California Code of Civil
Procedure section 638. The parties further expressly waived their right to pre-trial
discovery. . . . In light of section 7.8 of the parties’ contract, we will not be providing
further discovery responses or documents in response to Dr. Velyvis’ written discovery
requests.” (Italics added.)
With the attorney defendants having been dismissed from the case, the litigation
was now between Dr. Velyvis and CMG only.
CMG Files for Judicial Reference
On October 31, CMG filed a motion for protective order as to the discovery issues
and, as pertinent here, “to enforce dispute resolution provision.”6 The motion was set for
hearing on December 5, before Judge Ortiz.
Dr. Velyvis opposed the motion, and the motion came on for hearing on December
11.7 On that date Judge Ortiz noted that Dr. Velyvis’s counsel was not authorized to

24 Cal.4th 1122, 1131, italics added.) The judicial finding of entitlement was implicitly
made by Judge Ortiz when she granted defendants’ motion to strike.”
6
In late October, CMG requested Dr. Velyvis to stipulate to judicial reference. He
refused.

7
practice law as he was not an active member of the State Bar, and she continued the
hearing so that counsel could cure the defect.
Dr. Velyvis’s counsel cured the problem and filed a further opposition to CMG’s
motion, called a “Motion for Reconsideration.” The opposition argued that a judicial
reference and an arbitration are one and the same; that CMG waived the right to enforce
the judicial reference provision by not seeking to enforce it in the wrongful discharge
case and waiting too long to enforce it in the present action; and that the dispute
resolution provision was no longer in effect after termination of Dr. Velyvis’s
employment.
On January 16, 2014, Judge Ortiz granted CMG’s motion and denied Dr.
Velyvis’s motion for reconsideration. Judge Ortiz found that section 7.8 of the PEA
“clearly references C.C.P. §638” and the case law and statutes concerning arbitration did
not apply. She further held that CMG had not waived the dispute resolution provision
through delay, and that Dr. Velyvis had not established that he would suffer prejudice by
the submission of his claims to a referee. Based on all that, Judge Ortiz referred the
entire matter, including pending discovery disputes, to a referee of the parties’ choosing.
CMG apparently proposed several referees, all of whom Dr. Velyvis rejected. Dr.
Velyvis proposed retired Napa County Superior Court Judge Scott Snowden. CMG
agreed, and Judge Snowden became the referee, chosen by the parties.
The PEA did not address the issue of the payment of Judge Snowden’s fee, and the
parties could not agree as to any such allocation. So, on March 14, CMG filed in the
Superior Court a motion under section 645.1 for an equal allocation of fees. The parties
filed extensive briefs on the issue, and it came on for hearing on April 18, before the
Honorable Rodney Stone. On April 30, Judge Stone entered his order, concluding as
follows:
“Defendant’s Motion is GRANTED. As the Physician Employment Agreement
does not state which party is responsible for the cost of the referee, the cost should be

7
Perhaps the reason for the resetting was that CMG had filed a peremptory
challenge to Judge Ortiz. The challenge was ruled untimely.

8
split evenly between the parties. Plaintiff provides no authority for the proposition that
Defendant is responsible for the entire cost of the judicial referee. Plaintiff’s references
to case law and statutes concerning arbitration are not on point. Plaintiff does not claim
to be indigent or unable to pay his one half share of the cost of the referee.”
Judge Snowden had set the matter for hearing, prior to which, on June 17 and 18,
the parties submitted prehearing briefs and appendices of evidence. Neither Dr.
Velyvis’s brief nor his appendix of evidence is in the record. CMG’s brief and appendix
are. That appendix was voluminous, over 240 pages. It included Dr. Velyvis’s
complaint, the PEA, the letter terminating his employment, his FTO records that had been
provided in March 2012, relevant portions of CMG’s employee policy manual, and other
work records. CMG also submitted two declarations, those of Freda Barney, the manager
of Dr. Velyvis’s practice, and Daniel Madrid, CMG’s Chief Executive Officer.
On June 25, Judge Snowden held a one-day hearing. Both sides were represented
by counsel. The issues addressed were (1) whether as of his termination date Dr. Velyvis
had accrued any unused FTO; and (2) whether Dr. Velyvis was entitled to the discovery
he was seeking, which related to the FTO records of other doctors.
Judge Snowden heard from three witnesses: Dr. Velyvis, Mr. Madrid, and Ms.
Barney. Judge Snowden admitted various exhibits, and he also conducted an in camera
review of the FTO records for other doctors at the Coon Joint Replacement Institute.
Following the hearing, the parties submitted post-hearing briefs, which were
followed by reply briefs.
On September 16, Judge Snowden issued a comprehensive 15-page statement of
decision, a decision that can only be described as outright victory for CMG—and outright
rejection of all of Dr. Velyvis’s claims.
As to Dr. Velyvis’s FTO claim, Judge Snowden ruled in favor of CMG in all
respects. Discussing for over four pages the testimony of the witnesses and the
documentary evidence, Judge Snowden found that Dr. Velyvis had used more FTO time
than he had accrued. Then, Judge Snowden concluded as follows:

9
 “There are a few problems with Dr. Velyvis’s position. First, again, Dr. Velyvis
failed to call Dr. Coon (or any other physician from the Coon Joint Replacement Institute,
for that matter) to corroborate his account. Second, at the hearing, Mr. Madrid and Ms.
Barney testified that physicians were required to use FTO for time spent attending or
presenting at Continuing Medical Education events such as these. And third, Ms. Barney
testified that when Dr. Velyvis was absent from work in order to attend marketing events
that directly benefitted the Coon Joint Replacement Institute, she did not debit an FTO
day for such absences, but she did deduct an FTO day when Dr. Velyvis was simply
providing training and was being paid for it by a third party.
“Moreover, even if the Referee were to credit Dr. Velyvis’s testimony that these
four days directly benefitted the Joint Replacement Institute, and therefore, that these
days should not be counted toward his FTO days, Dr. Velyvis’s FTO balance would still
be -3. Dr. Velyvis, therefore, would still not be entitled to any FTO pay.
“Because Dr. Velyvis’s FTO balance was negative at the time of his termination,
he is not entitled to any FTO pay. Dr. Velyvis is therefore also not entitled to the
punitive damages, waiting time penalties, disgorgement of profits, attorneys’ fees and
interest that he seeks.”
Turning to the second issue, described as “Is Dr. Velyvis entitled to further
discovery?”, Judge Snowden held he was not, concluding that the evidence sought was
irrelevant. The issue was Dr. Velyvis’s FTO, not that of other doctors, and Dr. Velyvis
had the relevant documents—his own records, including FTO sheets and monthly FTO
records signed by him. Moreover, Judge Snowden observed, Dr. Velyvis had failed to
subpoena any of the other doctors, a failure Judge Snowden found “particularly glaring.”
But despite all that, as indicated, Judge Snowden took the further step of conducting an in
camera review of other doctors’ FTO records and found that the records did not assist Dr.
Velyvis’s case.
On October 16, Judge Stone entered an order confirming Judge Snowden’s
decision. Following that, judgment was entered, from which Dr. Velyvis filed a timely
appeal.

10
 DISCUSSION
Section 638 and the Law of Reference
Section 638 provides as follows:
“A referee may be appointed . . . upon the motion of a party to a written
contract . . . that provides that any controversy arising therefrom shall be heard by a
referee if the court finds a reference agreement exists between the parties:
“(a) To hear and determine any or all of the issues in an action or proceeding,
whether of fact or of law, and to report a statement of decision.”
Our colleagues in Division Five have well described the judicial reference
procedure, in O’Donoghue v. Superior Court (2013) 219 Cal.App.4th 245, 255–256
(O’Donoghue):
“ ‘Judicial reference involves sending a pending trial court action to a referee for
hearing, determination and a report back to the court.’ (Trend Homes, Inc. v. Superior
Court (2005) 131 Cal.App.4th 950, 955 (Trend Homes), disapproved on other grounds in
Tarrant Bell, supra, 51 Cal.4th 538.) ‘A general reference directs the referee to try all
issues in the action. The hearing is conducted under the rules of evidence applicable to
judicial proceedings. In a general reference, the referee prepares a statement of decision
that stands as the decision of the court and is reviewable as if the court had rendered it.
The primary effect of such a reference is to require trial by a referee and not by a court or
jury. [Citation.]’ (Treo @ Kettner Homeowners Assn. v. Superior Court (2008)
166 Cal.App.4th 1055, 1061 (Treo).)
“Section 638 ‘authoriz[es] courts to transfer a dispute to a referee’ pursuant to a
written agreement between the parties. (Grafton Partners v. Superior Court (2005)
36 Cal.4th 944, 960–961 (Grafton).)”
As indicated above, and as demonstrated by the discussion below, there are major
differences between a section 638 reference and an arbitration, including that the rules of
evidence apply, with perhaps the most significant difference being that a section 638
reference is subject to appeal under normal rules. In sum and in short, when the parties

11
agree to judicial reference as opposed to arbitration, they retain nearly all of their
procedural and constitutional rights.
That a section 638 reference is different from an arbitration is manifest by the
setting here: the PEA did not use the word arbitration; the parties never referred to
arbitration, retention of an arbitrator, or any arbitration rules; and neither the trial court
nor Judge Snowden ever described the judicial reference as an arbitration. There is no
evidence that either party believed that they were agreeing to, or engaging in, arbitration.
Dr. Velyvis’s brief ignores all that, and insists, however improperly, as referring
throughout his briefing to the “arbitration”, the “JAMS Arbitration”, or the “638
Arbitration.” And relying almost exclusively on arbitration cases, Dr. Velyvis makes an
array of arguments, which we discuss below. But in Dr. Velyvis’s words, his “lead
argument is that CMG’s form employment contract is unenforceable because it is
pervaded by procedural and substantive unconscionability.” We thus begin by addressing
such argument—and find it wanting.
Dr. Velyvis Has Not Demonstrated Unconscionability
The General Law
Our Supreme Court recently discussed the law of unconscionability at length, in
Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 910–912 (Sanchez):
“To aid understanding of the issues in this case, we begin by discussing general
principles of unconscionability. ‘ “One common formulation of unconscionability is that
it refers to ‘ “an absence of meaningful choice on the part of one of the parties together
with contract terms which are unreasonably favorable to the other party.” ’ [Citation.] As
that formulation implicitly recognizes, the doctrine of unconscionability has both a
procedural and a substantive element, the former focusing on oppression or surprise due
to unequal bargaining power, the latter on overly harsh or one-sided results.” ’ (Sonic II,
supra, 57 Cal.4th at p. 1133.)
“ ‘ “The prevailing view is that [procedural and substantive unconscionability]
must both be present in order for a court to exercise its discretion to refuse to enforce a

12
contract or clause under the doctrine of unconscionability.” [Citation.] But they need not
be present in the same degree. . . .’
“As we stated in Sonic II: ‘The unconscionability doctrine ensures that contracts,
particularly contracts of adhesion, do not impose terms that have been variously
described as “ ‘ “overly harsh” ’ ” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519,
1532), “ ‘ unduly oppressive’ ” (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913,
925, (Perdue)), “ ‘so one-sided as to “shock the conscience” ’ ” (Pinnacle Museum Tower
Assn. v. Pinnacle Market Development (2012) 55 Cal.4th 223, 246 (Pinnacle)), or
“unfairly one-sided” (Little [v. Auto Stiegler, Inc. (2003)] 29 Cal.4th [1064], 1071). All
of these formulations point to the central idea that unconscionability doctrine is
concerned not with “a simple old-fashioned bad bargain” (Schnuerle v. Insight
Communications Co. (Ky. 2012) 376 S.W.3d 561, 575 (Schnuerle)), but with terms that
are “unreasonably favorable to the more powerful party.” (8 Williston on Contracts
(4th ed. 2010) § 18.10, p. 91). These include “terms that impair the integrity of the
bargaining process or otherwise contravene the public interest or public policy; terms
(usually of an adhesion or boilerplate nature) that attempt to alter in an impermissible
manner fundamental duties otherwise imposed by the law, fine-print terms, or provisions
that seek to negate the reasonable expectations of the nondrafting party, or unreasonably
and unexpectedly harsh terms having to do with price or other central aspects of the
transaction.” (Ibid.)’ (Sonic II, supra, 57 cal.4th at p. 1145.) Because unconscionability
is a contract defense, the party asserting the defense bears the burden of proof. (Id. at p.
1148.)
“. . . Rather, ‘courts, including ours, have used various nonexclusive formulations
to capture the notion that unconscionability requires a substantial degree of unfairness
beyond “a simple old-fashioned bad bargain.” ’ (Id. at p. 1160, italics added.) This
latter qualification is important. Commerce depends on the enforceability, in most
instances, of a duly executed written contract. A party cannot avoid a contractual
obligation merely by complaining that the deal, in retrospect, was unfair or a bad bargain.
Not all one-sided contract provisions are unconscionable; hence the various intensifiers in

13
our formulations: ‘overly harsh,’ ‘unduly oppressive,’ ‘unreasonably favorable.’ (See
Pinnacle, supra, 55 Cal.4th at p. 246 [‘A contract term is not substantively
unconscionable when it merely gives one side a greater benefit. . . .’].) We clarify today
that these formulations, used throughout our case law, all mean the same thing.
“An evaluation of unconscionability is highly dependent on context. (See
Williams v. Walker-Thomas Furniture Co. (D.C. Cir. 1965) 350 F.2d 445, 450 [‘The test
is not simple, nor can it be mechanically applied.’].) The doctrine often requires inquiry
into the ‘commercial setting, purpose, and effect’ of the contract or contract provision.
(Civ. Code, § 1670.5, subd. (b); accord, Sonic II, supra, 57 Cal.4th at pp.1147–1148;
Walker-Thomas Furniture, at p. 450 [unconscionability must ‘be considered “in the light
of the general commercial background and the commercial needs of the particular trade
or case” ’].) As we have recognized, ‘ “a contract can provide a ‘margin of safety’ that
provides the party with superior bargaining strength a type of extra protection for which it
has a legitimate commercial need without being unconscionable.” ’ (Armendariz, supra,
24 Cal.4th at p. 177; see Walker-Thomas Furniture, at p. 450 [‘where no meaningful
choice was exercised upon entering the contract,’ the test is ‘whether the terms are “so
extreme as to appear unconscionable according to the mores and business practices of the
time and place” ’].) And, as noted, the substantive unfairness of the terms must be
considered in light of any procedural unconscionability. The ultimate issue in every case
is whether the terms of the contract are sufficiently unfair, in view of all relevant
circumstances, that a court should withhold enforcement.”8
So, and most fundamentally, Dr. Velyvis must show both procedural
unconscionability and substantive unconscionability. He has shown neither.
No Procedural Unconscionability
As to procedural unconscionability, Dr. Velyvis’s entire argument below was all
of twelve lines:

8
The law of unconscionability applies to all contracts. (Sanchez, supra, 61
Cal.4th at p. 912 [“unconscionability standard is, or it must be, the same for arbitration
and non-arbitration agreement.”].

14
 “Unconscionable arbitration agreements are unenforceable. Unconscionability
must be both procedural and substantive. (Armendariz v. Foundation Health Psychcare
Services, Inc. (2000) 24 Cal.4th 83, 114-121). Procedural unconscionability is the
absence of a meaningful opportunity to negotiate or the ‘agreement’ is presented on a
take-it-or-leave-it basis. (Wherry v. Award, Inc. (2011) 192 Cal.App.4th 1242,
1246-1248). In Wherry, procedural unconscionability was established because the
plaintiff was required to sign the agreement and he was given only a short time to sign it;
the form (a realtor association form) was a take-it-or-leave-it agreement; and the exhibits
appeared to be preprinted, only the compensation had been negotiated. (Wherry v.
Award, supra, 192 Cal.App.4th at 1247). Dr. Velyvis’ agreement was similar, consisting
almost entirely of standard, boilerplate terms. The only items that Dr. Velyvis had
discussed were compensation, a medical directorship and not being on emergency room
call. When the hospital’s CEO asked Dr. Velyvis to sign the CMG agreement he signed
it on the spot. (Dr. Velyvis’ declaration in opposition to CMG’s motion for protective
order, ¶ 3).” (Ftn. omitted.)
The referenced declaration—the sum total of Dr. Velyvis’s testimony describing
the PEA and how it came to be—was seven lines:
“I began my employment with CMG in 2010. Attached to my declaration as
Exhibit A and incorporated by this reference is a true and correct copy of my Physician
Employment Agreement with CMG dated July 1, 2010. I discussed only three items
about my employment with Terry Newmyer, CMG’s chief executive officer: salary,
medical directorship and not being on emergency room call. Later, Rick Bockman, the
chief executive officer of St. Helena Hospital presented me with the agreement, he asked
me to sign the agreement then and there - which I did. No one mentioned, or discussed,
Section 7.8 of the agreement or any of the issues presented in that part of the agreement.”
That is it. It is manifestly insufficient.
While a finding of adhesion is not a prerequisite for procedural unconscionability
(Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1408–1410), most cases finding
unconscionability have involved adhesion contracts. Certainly, Dr. Velyvis has not

15
shown such adhesion here, where even he admits he negotiated at least three specific
terms in the PEA. This is consistent with CMG’s attorney’s description below, that “the
employment contract was the product of extensive negotiations between Dr. Velyvis and
CMG’s counsel, including the exchange of at least six drafts of the agreement.”9
Dr. Velyvis points to no evidence to support any claim that the judicial reference
provision was not subject to negotiation, or that CMG would not have hired him had he
refused to agree to the provision. (See Circuit City Stores, Inc. v. Ahmed (9th Cir. 2002)
283 F.3d 1198, 1199.) Simply, there is no evidence that Dr. Velyvis was required to sign
the PEA with a judicial reference provision to obtain employment with CMG, no
evidence his employment was conditioned on it. Moreover, the negotiations establish
that the parties both had bargaining power. So too, do other facts, including that Dr.
Velyvis, a well-educated orthopedic surgeon, was to be paid an annual base salary of
$600,000 plus much more. He did not lack bargaining power.
Dr. Velyvis’s assertion that he was “asked” to sign the PEA when it was given to
him is hardly enough, even if he had been pressured to sign—which he does not assert.
(See Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 424 fn. 12
[even a claim that plaintiff “felt ‘rushed’ . . . or ‘pressured,’ ” standing alone is
insufficient. “Without evidence [that the other party] actually took some action or said
something to hurry or pressure the [plaintiff], however, these claims add nothing . . . .”].)
In sum, Dr. Velyvis failed to demonstrate that the PEA was a contract of adhesion.
But even if he had, “procedural unconscionability requires oppression or surprise.
‘ “Oppression occurs where a contract involves lack of negotiation and meaningful
choice, surprise where the allegedly unconscionable provision is hidden within a prolix
printed form.” ’ [Citation.]” (Pinnacle, supra, 55 Cal.4th at p. 247). Dr. Velyvis’s
opening brief does not even attempt to show oppression or surprise, not even mentioning
either subject. CMG’s respondent’s brief devotes over three pages to its argument that

9
Dr. Velyvis contends on appeal that this evidence is inadmissible hearsay, a
claim he did not meaningfully urge below.

16
Dr. Velyvis “made no attempt to establish oppression or surprise.” Dr. Velyvis’s reply
brief ignores the issue.
Dr. Velyvis having failed to demonstrate procedural unconscionability, his claim
necessarily fails, and we need not reach the subject of substantive unconscionability. But
there, too, Dr. Velyvis’s claim fails.
No Substantive Unconscionability
Though his argument is disjointed, and inconsistent between the opening and reply
briefs, we understand Dr. Velyvis to contend that the judicial reference provision is
substantively unconscionable in four particulars: (1) the waiver of pretrial discovery; (2)
the waiver of jury trial; (3) it allows CMG but not Dr. Velyvis to seek equitable relief;
and (4) it would potentially require Dr. Velyvis to pay for all dispute resolution costs,
including CMG’s attorneys’ fees. In a related argument, Dr. Velyvis also contends that
the trial court unconscionably ordered Dr. Velyvis to pay half of Judge Snowden’s costs.
Our colleagues described the issue of substantive unconscionability as involving
“contract terms that are so one-sided as to ‘shock the conscience,’ or that impose harsh or
oppressive terms.” (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th. 1199,
1213.) Dr. Velyvis fails to demonstrate that here.
Passing over that almost all Dr. Velyvis’s cases involve arbitration, the applicable
cases demonstrate that Dr. Velyvis’s claims are easily rejected.
As to the claimed lack of discovery, it is probably enough to note that, whatever
the PEA said, Dr. Velyvis’s claim to discovery was considered. Specifically, Judge Ortiz
ordered that “the case shall be submitted to a judicial referee” and “the judicial referee
will determine discovery matters.” And in accordance with that directive, Judge
Snowden addressed Dr. Velyvis’s discovery requests, ultimately to deny them. But not
because Dr. Velyvis was not entitled, but because the material sought was irrelevant.

17
 To the extent that this argument relies on Code of Civil Procedure, section
1282.2,10 that section, which is part of the California Arbitration Act, does not
apply—this is not arbitration. In any event, Dr. Velyvis’s argument ignores section
1282.2’s plain language, which requires discovery unless the “agreement otherwise
provides.” The PEA provided otherwise.
As to Dr. Velyvis’s claim based on the jury waiver, section 638 and the cases
interpreting it uphold such waiver. As our Supreme Court described in a case relied on
by Dr. Velyvis, section 638 “include[s] predispute agreements, now authorizing a judicial
reference ‘upon . . . the motion of a party to a written contract or lease that provides that
any controversy arising therefrom shall be heard by a referee.’ ” (Grafton, supra, at
pp. 960–961 (Grafton), quoting Code Civ. Proc. § 638 [emphasis omitted].)
So, for example, in Woodside Homes of California, Inc. v. Superior Court (2006)
142 Cal.App.4th 99, 104–105 (Woodside), the court noted that “A statute permitting
agreement for a reference unambiguously results in a waiver of ‘jury trial’ without the
need to use those words. Such a reference (like arbitration) entails dispensing with trial
in the judicial forum, including jury trial.” O’Donoghue is in accord, upholding a jury
waiver where the subject was not even mentioned in the agreement, citing cases
enforcing reference provisions “that did not mention the words ‘jury,’ ‘waiver,’ or
‘trial.’ ” (O’Donoghue, supra, 219 Cal.App.4th at p. 256.)
Dr. Velyvis next contends that the PEA is substantively unconscionable because it
grants CMG the right to equitable relief while denying Dr. Velyvis that right. Section 6.4
of the PEA—language Dr. Velyvis ignores—explains why his claim must fail. This

10
This section provides as follows: “Unless the arbitration agreement otherwise
provides . . . . [¶] . . . [¶] Either party shall within 15 days of receipt of the notice of
hearing have the right to demand in writing, served personally or by registered or
certified mail, that the other party provide a list of witnesses it intends to call designating
which witnesses will be called as expert witnesses and a list of documents it intends to
introduce at the hearing provided that the demanding party provides such lists at the time
of its demand. A copy of such demand and the demanding party’s lists shall be served on
the arbitrator.” (Code Civ. Proc., § 1282.2, introductory para. & subd. (a)(2)(A).)

18
Section provides: “Physician hereby acknowledges that the breach by Physician of any
provision of this Article VI would result in irreparable harm to Group, the amount and
nature of which cannot be reasonably or adequately compensated for in money damages.
Physician therefor [sic] agrees that Group, in addition to any rights or remedies which
Group may possess, shall be entitled to injunctive and other equitable relief to prevent or
remedy a breach by Physician of this Article VI.”
This section restates the common law principle that injunctive relief may be
available where contract damages do not suffice to compensate plaintiff. (Tamarind
Lithography Workshop, Inc. v. Sanders (1983) 143 Cal.App.3d 571, 575 [equitable
remedy available where legal remedy “inadequate as a matter of law”].) This simply
confirms CMG’s right to seek equitable relief in certain circumstances . And it is specific
to CMG because it deals with violations of Article VI of the PEA, which addresses Dr.
Velyvis’s obligation not to compete with CMG.
Finally, there is nothing necessarily one-sided about this provision, as there is
nothing in the PEA that prevents Dr. Velyvis from pursuing an equitable remedy, as
perhaps best shown by Dr. Velyvis’s attempt to obtain a preliminary injunction
compelling his reinstatement.
Dr. Velyvis’s final claim of substantive unconscionability attacks the provision in
the PEA allowing the prevailing party to recover fees and costs. That is in Section 7.3,
which states that “[i]f either Party brings an action for any relief or collection against the
other Party, declaratory or otherwise, arising out of the arrangement described in this
Agreement, the losing Party shall pay to the prevailing Party a reasonable sum for
attorneys’ fees and costs actually incurred in bringing such action . . . .”
Section 7.3 applies to “an action for any relief.” It thus applies independently of
the judicial reference provision. So, Dr. Velyvis could have been responsible for attorney
fees under this provision whether or not the case was sent to judicial reference. Beyond
that, we see no difference between this provision and any attorney fee provision in any
contract allowing attorney fees to the prevailing party.

19
 In arguments related to unconscionability, Dr. Velyvis claims that (1) the
reference provision is unconscionable because the trial court allocated the judicial
reference costs equally between him and CMG; and (2) he was denied a civil action, in
violation of Labor Code section 229. Neither claim has merit.
Section 645.1, subd. (b) provides that when there has been a judicial reference, the
court may order the payment of the referee’s fees in any manner that is “fair and
reasonable, including an apportionment of the fees among the parties.” This, of course, is
reserved for the court’s discretion. And Dr. Velyvis has not demonstrated any abuse, not
where the court apportioned the fees 50-50. This is certainly reasonable, especially
where Dr. Velyvis was earning more than $600,000 annually.11
As to the Labor Code section 229 claim, it cannot apply. That section provides
that “[a]ctions to enforce the provisions of this article for the collection of due and unpaid
wages claimed by an individual may be maintained without regard to the existence of any
private agreement to arbitrate.” Here, as noted, there was no agreement to arbitrate, but
rather an agreement to a judicial reference. (See Woodside, supra, 107 Cal.App.4th at p.
726 [“this is not an arbitration case, and therefore not all authorities dealing with
arbitration agreements are directly relevant.”].) Beyond that, a judicial reference is a civil
proceeding, “a pending court action [that] is sent to a referee for hearing, determination
and a report back to the court.” (Treo, supra, 166 Cal.App.4th at p. 1061.) The judgment
that follows is a judgment of the court, following the referee’s recommendation “on the
merits of any disputed issue,” objections by the parties, responses to the objections, and
the court’s review of the objections and the entry of “appropriate orders.” (Code Civ.
Proc., §643, subd. (c).) And the court need not adopt the referee’s recommendations.

11
While we conclude that an equal allocation was fair under the circumstances,
such allocation is irrelevant to the issue of unconscionability, which depends on the
PEA’s language and the parties’ expectations when they signed it—not by an
after-the-fact allocation of costs by the court. (Civ. Code. §1670.5, subd. (a) [“If the
court as a matter of law finds the contract or any clause of the contract to have been
unconscionable at the time it was made the court may refuse to enforce the contract”]
(emphasis added).) Given that the PEA is silent on cost allocation, Dr. Velyvis would
have to establish that the silence is unconscionable.

20
 Dr. Velyvis Has Not Demonstrated Waiver
Dr. Velyvis argued below, and maintains here, that CMG waived the right to
judicial reference. Judge Ortiz rejected the claim, in a thorough discussion that found Dr.
Velyvis’s arguments “not persuasive,” a discussion that ended as follows:
“Even when a party has used discovery procedures and has delayed in seeking
judicial reference, if there is no prejudice to the other party, a court may conclude that
there has been no waiver of the right to judicial reference. [Citation.] Plaintiff has not
established that he will be prejudiced . . . .”
Never even acknowledging Judge Ortiz’s findings, Dr. Velyvis argues that CMG
waived its rights in two particulars: (1) because “CMG did not raise the ‘referee’ issue”
in the wrongful discharge case, and (2) by delay, going on to assert that “CMG repeatedly
waived its numerous opportunities to seek arbitration.”
The argument is particularly unpersuasive, especially in light of the appellate law,
which is devastating. Again O’Donoghue is apt:
“ ‘ “Generally, the determination of waiver is a question of fact, and the trial
court’s finding, if supported by sufficient evidence, is binding on the appellate court.
[Citations.]” ’ . . . Where, as here, the facts are disputed, ‘[o]ur function is to determine
whether the trial court’s finding of no waiver is supported by substantial evidence.’
[Citations.] ‘We infer all necessary findings supported by substantial evidence [citations]
and “construe any reasonable inference in the manner most favorable to the judgment,
resolving all ambiguities to support an affirmance” [citation].’ [Citation.] [¶] . . . Our
high court, however, has articulated six factors a trial court should consider to determine
whether a party has waived its right to arbitrate: ‘ “ ‘(1) whether the party’s actions are
inconsistent with the right to arbitrate; (2) whether “the litigation machinery has been
substantially invoked” and the parties “were well into preparation of a lawsuit” before the
party notified the opposing party of an intent to arbitrate; (3) whether a party either
requested arbitration enforcement close to the trial date or delayed for a long period
before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim
without asking for a stay of the proceedings; (5) “whether important intervening steps

21
[e.g., taking advantage of judicial discovery procedures not available in arbitration] had
taken place”; and (6) whether the delay “affected, misled, or prejudiced” the opposing
party.’ [Citations.]” ’ (St. Agnes Medical Center v. PacifiCare of California (2003) 31
Cal.4th 1187, 1196 (St. Agnes).)
“Though some courts apply a more limited three-factor test, ‘ “the party who seeks
to establish waiver must show that some prejudice has resulted from the other party’s
delay in seeking arbitration.” ’ [Citations.] In addition, just as public policy favors
arbitration, public policy should favor judicial reference. In a statutory judicial reference,
parties have the advantage of a decision maker of the parties’ own choosing, who will
schedule reliable hearing and trial dates with flexibility to accommodate competing
scheduling issues. (See Kough, Judicial References (Aug. 2013) Cal. Lawyer, p. 17; see
also Woodside I, supra, 107 Cal.App.4th at pp. 732–733 [judicial reference ‘provides
economies both of time and expense’].) The parties retain the procedural rights of a civil
trial court, including the right to appeal. (§645.) Parties may agree to a determination of
all or only some of the issues in an action, ‘whether of fact or of law’ (§638, subd. (a)),
and a referee may be appointed to ‘ascertain a fact necessary to enable the court to
determine an action or proceeding’ (§638, subd. (b)). It follows that a party’s argument
that judicial reference has been waived should be subject to the same ‘close judicial
scrutiny’ as a waiver of arbitration and the ‘party seeking to establish a waiver bears a
heavy burden of proof.’ (St. Agnes, supra, 31 Cal.4th at p. 1195.) Applying these
principles here, we conclude plaintiff has not waived its right to judicial reference
because defendants have not demonstrated prejudice on the record before us.”
(O’Donoghue, supra, 219 Cal.App.4th at pp. 262–264.)
To sum it up: public policy favors judicial reference; the procedural rights of a
civil case, including right to appeal, are maintained; Dr. Velyvis must show prejudice,
and he has a “heavy burden of proof.”
It is probably enough to note that Dr. Velyvis does not even attempt to meet his
burden, not even arguing that there is no substantial evidence to support Judge Ortiz’s
ruling. In any event, Dr. Velyvis’s attempt is inadequate.

22
 Impliedly conceding that the last three of the six St. Agnes factors do not pertain,
Dr. Velyvis attempts to rely on the first three: actions inconsistent with compelling
reference, substantial invocation of litigation machinery, and prejudice. The reliance is
misplaced.
Dr. Velyvis argues that waiver is demonstrated by the fact that CMG did not move
for judicial reference in the wrongful discharge case. Dr. Velyvis cites no cases, and we
have found none, holding that failure to move in one case shows waiver in another. In
any event, the relevant factors focus on CMG’s conduct, and prejudice to Dr. Velyvis in
the pending litigation. So, not seeking a judicial reference in other litigation involving
other issues is irrelevant, not to mention that the wrongful discharge case settled some
five weeks after Dr. Velyvis filed it.
Dr. Velyvis argues that CMG waived its right to compel reference by promising in
written discovery responses to produce documents. CMG, however, moved to compel
judicial reference as soon as reasonably practicable, that is, shortly after the attorney
defendants were dismissed on the anti-SLAPP motion.12 In sum, Dr. Velyvis does not
show that CMG invoked “the litigation machinery.” What it did was respond to some
discovery requests, which is certainly not enough, as O’Donoghue notes, holding that
even conducting discovery does not constitute a waiver. (O’Donoghue, supra, 219
Cal.App.4th at p. 263–264.)
Finally, Dr. Velyvis has not met his heavy burden of showing prejudice. He
contends he was prejudiced because CMG promised certain discovery but did not have to
provide it because of the discovery waiver in the PEA; and he goes on, citing
O’Donoghue, the discovery waiver was prejudicial because one of the factors
establishing prejudice is whether “defendants have the same right to discovery before a

12
Since the attorney defendants Dr. Velyvis named in the FTO case were not
parties to the PEA, they had no contractual right to seek judicial reference. So, had CMG
moved to compel judicial reference with the attorneys still in the case, CMG might well
have faced the risk its motion would be denied, since a court that considers such a motion
must consider “the risk of inconsistent rulings and consideration of judicial economy,”
with “inconsistent rulings” disfavored. (Tarrant Bell, supra, 51 Cal.4th. at pp. 544–545.)

23
judicial referee as they do in court.” Not only does this misread O’Donoghue, but, as
noted, the discovery issue was reserved by Judge Ortiz’s order—and in fact decided by
Judge Snowden.
Finally, Dr. Velyvis argues he was prejudiced because he had to pay his share of
Judge Snowden’s fees and might have had to pay attorney’s fees incurred in the judicial
reference proceeding We addressed these issues above. Furthermore, the argument is
not related to waiver, i.e., it is not CMG’s purported delay that caused, or could have
caused, Dr. Velyvis to pay fees.
DISPOSITION
The judgment is affirmed. CMG shall recover its costs on appeal.

24
 _________________________
Richman, Acting P.J.

We concur:

_________________________
Stewart, J.

_________________________
Miller, J.

A144273; Velyvis v. Adventist Health

25