Judge: Armen Tamzarian, Case: 20STCV01345, Date: 2023-11-03 Tentative Ruling

Case Number: 20STCV01345    Hearing Date: November 3, 2023    Dept: 52

Motions to Seal

Plaintiffs Alvarado Hospital, LLC et al. move to seal portions of the final arbitration award attached as exhibit F to the declaration of David J. Tassa in support of plaintiffs’ petition to confirm arbitration award.

Defendant Health Net of California, Inc. (Health Net) moves to seal plaintiffs’ petition to confirm arbitration award and its supporting papers and Health Net’s opposition and its papers in support of the opposition. 

Legal Standard for Sealing Records

California Rules of Court, rule 2.550(d) provides:

A court may order that a record be filed under seal only if it expressly finds facts that establish:

(1) There exists an overriding interest that overcomes the right of public access to the record;

(2) The overriding interest supports sealing the record;

(3) A substantial probability exists that the overriding interest will be prejudiced if the record is not sealed;

(4) The proposed sealing is narrowly tailored; and

(5) No less restrictive means exist to achieve the overriding interest.

Plaintiffs’ Motion to Seal

            Plaintiffs move to seal individuals’ protected health information.  “[M]edical records are constitutionally private and statutorily confidential.”  (Oiye v. Fox (2012) 211 Cal.App.4th 1036, 1070.)  Courts “regard medical records as presumptively private, such that plaintiff was not required to state the obvious in a declaration, that she would be personally embarrassed to have her medical records copied into court records.”  (Ibid.) 

The records plaintiffs lodged with the court as the “unredacted” copy, however, have the same redactions as the publicly filed version.  These filings establish that plaintiff does not meet the fifth element.  Redaction is a simple, less restrictive means to fully achieve the overriding interest in protecting people’s private health information.  None of their health information is relevant to the petition to confirm the arbitration award.  The final award has a handful of redactions that appear to be patients’ names.  (E.g., Tassa Decl., Ex. F, Sample Claims Decisions, pp. 2-9.)  Plaintiffs’ counsel states, “No material other than patient names has been redacted.”  (Tassa Decl. ISO Motion to Seal, ¶ 5.)  That plaintiffs did not lodge the unredacted version of the document makes no difference to the court’s ability to consider the petition to compel arbitration.  There is no need to seal anything.  The publicly filed redacted documents suffice.

Health Net’s Motion to Seal

            Health Net moves to seal its entire opposition and the entire declaration in support of its opposition.  It also purports to move to seal all of plaintiffs’ papers in support of their petition to confirm the arbitration award.

Health Net does not meet any of the first four elements under California Rules of Court, rule 2.550(d).  Its motion to seal argues the records have “confidential information” that “contain proprietary, financial, and/or trade secret information.”  (Motion, p. 4.)  “[C]onfidential matters relating to the business operations of defendant” can constitute an overriding interest that justifies sealing of records when “public revelation of [the] matters would interfere with its ability to effectively compete in the marketplace… .”  (Universal City Studios, Inc. v. Super. Ct. (2003) 110 Cal.App.4th 1273, 1286.)  A court may deny a motion to seal if it finds the supporting “declarations conclusory or otherwise unpersuasive.”  (In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 301.)

The memorandum in support of Health Net’s motion asserts, “Health Net derives independent economic value from the programs and services provided in the Agreements and discussed in the Confidential Information.”  (Memo, p. 5.)  Health Net provides no supporting evidence.  As the Court of Appeal has stated, “There is no concrete evidence of any interest, let alone an overriding one, that would be damaged by the unsealing of these materials.  At most there are contentions and conclusory averments” about confidentiality.  (H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 891–892.)           

Health Net’s only evidence in support of its motion is the declaration of attorney David S. Yates, which authenticates “copies of the confidentiality provisions of the agreements between Health Net and Prime.”  (Yates Decl., ¶ 2, Exs. A-O.)  But “the mere agreement of the parties alone is insufficient to constitute an overriding interest to justify sealing the documents.”  (McNair v. National Collegiate Athletic Assn. (2015) 234 Cal.App.4th 25, 36.)  The parties must also make “ ‘a specific showing of serious injury.’ ”  (Ibid.)

The agreements provide, “The parties agree that the content and decision of any arbitration proceeding shall be confidential unless disclosure is required by applicable State or federal statutes or regulation.”  (Yates Decl., Exs. A, p. 18 of 45.)  These agreements do not constitute any overriding interest that justifies sealing the records.  There is applicable State and federal law requiring disclosure: California has “recognized a constitutional right of access to certain court documents grounded in the First Amendment.”  (Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th 471, 484.)

            Moreover, the proposed sealing is far from narrowly tailored.  Health Net moves to seal its entire opposing memorandum.  Its opposing memorandum contains only legal arguments and references to evidence about the conduct of the arbitration proceeding.  It includes no protected health information or purported trade secret or proprietary information, such as the capitation fees Health Net pays. 

Disposition

Plaintiffs Alvarado Hospital, LLC, et al.’s motion to seal is denied. 

Defendant Health Net of California, Inc.’s motion to seal is denied.

California Rules of Court, rule 2.551(b)(6) states the procedure after the court denies a motion to seal: “If the court denies the motion or application to seal, the moving party may notify the court that the lodged record is to be filed unsealed.  This notification must be received within 10 days of the order denying the motion or application to seal, unless otherwise ordered by the court.  On receipt of this notification, the clerk must unseal and file the record.  If the moving party does not notify the court within 10 days of the order, the clerk must (1) return the lodged record to the moving party if it is in paper form or (2) permanently delete the lodged record if it is in electronic form.”

The parties thus have two options.  First, if they do not act within 10 days, the court will return and delete the lodged records.  The redacted versions of the records will remain in the court’s public file.  As to Health Net’s opposing brief, doing so will be fatal to Health Net’s opposition to the petition to confirm arbitration award because the publicly filed document is fully redacted.  (The only exceptions are the caption and proof of service.)

Second, the parties may notify the court within 10 days that they choose for the unredacted records to be filed unsealed. 

Plaintiffs Alvarado Hospital, LLC et al.’s Petition to Confirm Final JAMS Arbitration Award

Plaintiffs Alvarado Hospital, LLC et al. petition to confirm the final arbitration award against defendant Health Net of California, Inc. (Health Net).  In its opposition, Health Net moves to vacate the arbitration award.

Legal Standard for Confirming or Vacating Arbitration Awards

Code of Civil Procedure section 1286 provides, “If a petition or response under this chapter is duly served and filed, the court shall confirm the award as made … unless in accordance with this chapter it corrects the award and confirms it as corrected, vacates the award or dismisses the proceedings.”  

Plaintiffs’ petition meets all requirements for a petition to confirm arbitration award under Code of Civil Procedure sections 1285 and 1285.4.  The court therefore must confirm the award unless Health Net’s response establishes a basis for vacating the award.

Did the arbitrator exceed his powers?

A court must vacate the award if it determines “[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.”  (CCP § 1286.2(a)(4).)  “Arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error, for  ‘ “[t]he arbitrator’s resolution of these issues is what the parties bargained for in the arbitration agreement.” ’ ”  (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1184.)  Parties may, however, agree to “constrain the arbitrators’ authority by requiring a dispute to be decided according to the rule of law, and make plain their intention that the award is reviewable for legal error.”  (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1355 (Cable Connection).)

The Cable Connection court stressed that its holding was based on the parituclar language of the arbitration clause in that case.  (Cable Connection, supra, 44 Cal.4th at p. 1361.)  The court further advised parties seeking to allow judicial review on the merits to  “explicitly and unambiguously” grant that power in the arbitration clause.  (Ibid.)

Here, the parties’ arbitration agreements provide, “The arbitrator shall have no authority to make material errors of law or to award punitive damages or to add to, modify, or refuse to enforce any agreements between the parties.  The arbitrator shall make findings of fact and conclusions of law and shall have no authority to make any award, which could not have been made by a court of law.”  (Tassa Decl., Exs. G-U, § 7.6.)  Plaintiffs contend this provision does not explicitly and unambiguously grant this court the power to review the arbitrator’s decision on the merits.  The court does not reach this issue because assuming this provision expands the typical scope of judicial review of an arbitration award, the court would not vacate the award on that basis. 

Health Net contends “the arbitrator exceeded his powers by requiring Health Net to reimburse Prime [plaintiffs] for claims that are the financial responsibility of Delegated Entities.”  (Opp., p. 9.)  Health Net forfeited this argument by failing to raise it during the arbitration.  “ ‘[A] party who knowingly participates in the arbitration process without disclosing a ground for declaring it invalid is properly cast into the outer darkness of forfeiture.’ ”  (Goodwin v. Comerica Bank, N.A. (2021) 72 Cal.App.5th 858, 866–867.)  “‘[A] party may not sit idle through an arbitration proceeding and then collaterally attack that procedure on grounds not raised before the arbitrators when the result turns out to be adverse.’ ”  (Mossman v. City of Oakdale (2009) 170 Cal.App.4th 83, 93.)

The argument that delegated entities were financially responsible for many claims was one of Health Net’s primary substantive defenses in the arbitration proceeding.  (See, e.g., Health Net’s Pre-Hearing Arbitration Brief, pp. 8-14.)  For example, Health Net briefed the issue of its “liability for claims that are a Delegated Entity’s financial responsibility.”  (Id., p. 12.)   But Health Net never raised any argument that, under the PPAs’ arbitration provisions or the parties’ stipulation to arbitrate, the arbitrator had no power to impose liability on Health Net for those claims.  “[C]ourts should generally defer to an arbitrator’s finding that determination of a particular question is within the scope of his or her contractual authority.”  (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 372.)  Health Net deprived the arbitrator of an opportunity to determine whether he had such power.  Vacating the award on this basis would permit Health Net to unfairly reserve an argument to use only if it lost at arbitration.    

Even if Health Net had not forfeited this argument, the arbitrator did not exceed his powers because he made no material error of law.  Health Net relies on arguments the arbitrator, Hon. Fred K. Morrison (Ret.), expressly rejected in the final award.  (Tassa Decl., Ex. F, Award, pp. 8-17.)  The court agrees with the arbitrator’s analysis. 

As the award states, sections 3.1 and 4.1 of the parties’ provider participation agreements (PPAs) state that Health Net shall either pay or “shall require Payor to” pay the applicable rates.  (Tassa Decl., Ex. F, p. 12.)  The arbitrator further found, “[T]he evidence showed that Health Net’s contracts with the delegated entities give Health Net the right to compel them to pay claims that are otherwise the responsibility of the delegated entity.”  (Ibid.)  The arbitrator thus ruled, “[W]here Health Net failed to demonstrate it pursued the [claim] review process with the nonpaying delegated entity, or failed to pay a timely submitted complete claim by deducting capitation fees where the delegated entity failed to pay, Health Net breached sections 3.1 and 4.1 of the PPAs.”  (Id., p. 13.)  The arbitrator concluded, “Health Net was contractually obligated under the PPAs to require payors to pay Prime, through its capitation deduction process, where delegated entities failed to pay Prime’s timely submitted and appealed complete claims.”  (Id., p. 42.) 

Health Net also argues, “The Parties only agreed to submit to arbitration the issue of whether Health Net or a Delegated Entity was financially responsible for the claims at issue in the arbitration.  They did not agree that the arbitrator could order Health Net to pay Prime for the claims that were the financial responsibility of the Delegated Entities and then seek to recover those amounts through the cap deduct process.”  (Opp., p. 11.) 

The parties agreed to arbitrate any “Dispute” as defined in the PPAs.  (Tassa Decl., Exs. G-U, § 7.6.)  The PPAs provide, “The term ‘Dispute’, as used in this Agreement, including Sections 7.5 and 7.6, shall mean any controversy or disagreement that may arise out of or relate to this Agreement, or the breach thereof, whether involving a claim in tort, contract or other applicable area of law.”  (Supp. Tassa Decl., Ex. B, § 1.10.)  These disputes all arise out of or relate to the PPAs between Health Net and the plaintiff hospitals.  The parties thus agreed the arbitrator could resolve these disputes as to whether Health Net breached the PPAs (along with other related legal theories to recover any money owed).  And the arbitrator decided that, for some of the sample claims where a Delegated Entity was financially responsible, Health Net breached sections 3.1 and 4.1 of the PPAs.

Did the arbitrator refusal to hear material evidence?

Health Net also argues the award should be vacated because the arbitrator refused to hear material evidence regarding other claims plaintiffs settled with delegated entities.  (Opp., pp. 12-15.)  A court shall vacate an arbitration award if “[t]he rights of the party were substantially prejudiced … by the refusal of the arbitrators to hear evidence material to the controversy.”  (CCP § 1286.2(a)(5).)  “The statutory provision is ‘a safety valve in private arbitration that permits a court to intercede when an arbitrator has prevented a party from fairly presenting its case.’ ”  (Epic Medical Management, LLC v. Paquette (2015) 244 Cal.App.4th 504, 518.)  This provision reflects “the fundamental principle that ‘[a]rbitration should give both parties an opportunity to be heard.’ ”  (Royal Alliance Associates, Inc. v. Liebhaber (2016) 2 Cal.App.5th 1092, 1108.)  In Royal Alliance, the arbitrators violated this provision because, while both parties “were permitted to submit written evidence,” only one party “was given the opportunity to offer oral evidence.”  (Ibid.)

The arbitrator did not refuse to hear material evidence.  Health Net’s argument on this subject concerns refusing to compel discovery, not refusing to hear evidence.  The opposition argues, “[T]he arbitrator improperly denied Health Net’s request to compel Prime to produce information regarding its settlements with Delegated Entities that may have reduced the award against Health Net.”  (Opp. p. 12.)  In Hyatt Franchising, L.L.C. v. Shen Zhen New World I, LLC (7th Cir. 2017) 876 F.3d 900, 901, the court interpreted a similar provision in the Federal Arbitration Act permitting vacatur “ ‘where the arbitrators were guilty of misconduct in … refusing to hear evidence pertinent and material to the controversy.’ ”  The court reasoned, “The statutory phrase ‘refusing to hear evidence’ concerns the conduct of the hearing, not the conduct of discovery.”  (Ibid.)  Health Net provides no authority that denying a motion to compel discovery constitutes “refusal of the arbitrators to hear evidence material to the controversy” under Code of Civil Procedure section 1286.2(a)(5).    

Moreover, it is undisputed that Health Net moved to compel discovery of plaintiffs’ settlements with delegated entities “after the arbitration hearing.”  (Opp, p. 12.)  “[S]ubdivision (a)(5) of section 1286.2 does not oblige the arbitrator to ‘reopen’ the presentation of evidence to consider new evidence.”  (Cooper v. Lavely & Singer Professional Corp. (2014) 230 Cal.App.4th 1, 20, fn. 8.) 

The hearing was held in July and August 2022.  (Tassa Decl., ¶ 7.)  The parties submitted post-hearing briefs on October 12, 2022 and responding post-hearing briefs on November 2, 2022.  (Id., ¶ 8.)  The arbitrator’s interim award was served on the parties on January 3, 2023.  (Id., ¶ 9.)  Health Net moved to compel plaintiffs to produce documents regarding claims settled with delegated entities two weeks later on January 19, 2023.  (Allen Decl., ¶ 8, Ex. G.)  The arbitrator “determined that the hearing was ‘deemed closed’ ” already.  (Opp., p. 13.)  Even if the arbitrator had discretion to reopen the hearing and grant Health Net’s motion to compel discovery, failing to do so after the arbitration hearing does not constitute refusing to hear material evidence.  The arbitrator’s decision to deny Health Net’s request did not deprive it of a fair opportunity to be heard.   

Disposition

Plaintiffs Alvarado Hospital, LLC et al.’s petition to confirm final JAMS arbitration award is granted.  The final arbitration award (Tassa Decl., Ex. F) is hereby confirmed.  Plaintiffs shall submit a proposed judgment forthwith.