If you sign a contract that requires arbitration of disputes, and then decide you don’t like the terms of the deal you’ve made, don’t expect the courts to let you bypass that arbitration.

That’s the lesson of a case recently decided by the California Court of Appeal (Epstein v Vision Service Plan).

Gordon Epstein, a Bay Area optometrist, signed an agreement to become one of the 38,000 “network providers” with Vision Service Plan. VPS insures about 80 million Americans for vision care expenses, and is the largest such company in California.

The 14-page agreement Epstein signed with VPS required him to have his patients’ eyeglass lenses made by a lab owned by the company or under contract with it.

Lenstek was a VPS-contracted lab until its contract was terminated in 2009. It then began secretly making lenses for Nouveau Labs, which had a contract with VPS. So Lenstek continued to make lenses for VPS policyholders, serving them indirectly through Nouveau.

When VPS discovered the arrangement between the two labs, it terminated its contract with Nouveau Labs and sued the company.

It also learned that Epstein had been having his lenses made by Nouveau Labs for three years, for which VPS had paid over $104,000. Claiming that Epstein knew of the arrangement between the two labs, VPS terminated its provider contract with the optometrist and demanded repayment from him of the $104,000 it had paid for the lenses.

The agreement between Epstein and VPS required that disputes be handled through a two-step process.

First, Epstein could request a “Fair Hearing” before a 3-person panel, following procedures spelled out in the contract.

If dissatisfied with the results of that hearing, either party could request “final determination and resolution” through binding arbitration. Arbitration, the contract stated, “shall be the sole method, in lieu of a jury or court trial.”

Epstein invoked the Fair Hearing step. A panel heard testimony, reviewed documents and other testimony, and found in favor of VPS, upholding its termination of Epstein’s provider agreement and demand for reimbursement.

Instead of requesting arbitration, as called for in his contract with VPS, Epstein filed suit in Alameda County Superior Court, asking the court to order the hearing panel to reverse its decision.

He claimed that the clause requiring arbitration was contrary to various California laws that regulate network provider agreements and insurance contracts.

He also said the two-step dispute resolution process used by VPS was “procedurally and substantively unconscionable,” because of the greater power held by VPS compared to an individual provider, and was therefore unenforceable.

The trial court rejected Epstein’s arguments about state law and about unconscionability, and said by failing to request arbitration he had not exhausted the administrative remedies available to him.

He appealed, but the appellate court also declined to see things his way.

State laws regulating network provider agreements do require them to include a dispute resolution process other than arbitration, the appellate justices said, but that applies only to the first step of the process. The laws don’t preclude the parties from agreeing to arbitration as an additional step.

Because of its size and dominance in the vision-care marked, they acknowledged, VPS did have greater bargaining power than Epstein. But this did not result in “overly harsh or one-sided results,” and thus the agreement was not “unconscionable.”

Even if a contract is unconscionable, that doesn’t mean a court cannot enforce it, the justices noted. Instead, the courts will scrutinize specific terms of such an agreement “to ensure they are not manifestly unfair or one-sided.”

The appellate court affirmed the trial court’s ruling in favor of VPS and ordered Epstein to pay the company’s costs on appeal.

By  Laurie Murphy