Judge: David B. Gelfound, Case: 23CHCV01046, Date: 2024-06-24 Tentative Ruling

Case Number: 23CHCV01046    Hearing Date: June 24, 2024    Dept: F49

LOS ANGELES SUPERIOR COURT

NORTH VALLEY DISTRICT

DEPARTMENT F49

MOTION TO COMPEL ARBITRATION

Motion filed: 5/20/24

MOVING PARTY: Defendant Housekeeps Manpower Healthcare, LLC (“Housekeeps” or the “Moving Defendant”) 

RESPONDING PARTY: Plaintiff Andrew Swihart, individually and as personal representative and successors-in-interest to the Estate of Timothy Swihart (“Swihart” or “Plaintiff”)

NOTICE: OK¿¿ 

RELIEF REQUESTED: An order from this Court (1) compelling Plaintiff to submit to binding arbitration, and (2) staying proceedings for the remaining Plaintiff pending the resolution of the arbitration.

TENTATIVE RULING: The motion is DENIED.

BACKGROUND

This elder abuse action involves Plaintiff who is the child and successor-in-interest of decedent Timothy Swihart (“Decedent”) against Defendants who are alleged to have acted negligently in providing their in-house hospice and nursing care.

On April 11, 2023, Plaintiffs Andrew Swihart and Amy Schmid, individually and as personal representatives and successors-in-interest of the Estate of Timothy Swihart (collectively, “Plaintiffs”) initiated the action. Subsequently, Housekeeps filed an Answer to the Complaint on July 28, 2023.

On December 21, 2023, Plaintiffs filed a request for dismissal, dismissing Plaintiff Amy Schmid, which was entered by the Clerk on December 22, 2023.

Following a demurrer filed by Defendants Kumar Lifecare Hospice, Inc. dba AASTA Hospice (Doe 1) and Kumar Lifecare Hospice, Inc. (Doe 2) (collectively, “Kumar”) on September 19, 2023, which was subsequently sustained in part by Department F51 Court, Plaintiff Swihart was granted leave to amend. On January 3, 2024, Plaintiff filed the operative First Amended Complaint (“FAC”). Subsequently, Kumar and Housekeeps filed their respective Answers to the FAC on February 20 and March 11, 2024, respectively.

On May 20, 2024, Housekeeps filed the instant Motion to Compel Arbitration (the “Motion”).

Subsequently, Plaintiff filed an Opposition to the Motion on June 4, 2024, and Housekeeps replied on June 14, 2024.

ANALYSIS

Under Code of Civil Procedure section 1281.2, “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy ... the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists,” unless the court finds that the right to compel arbitration has been “waived by the petitioner,” or that “grounds exist for rescission” of the arbitration agreement. (Code Civ. Proc., § 1281.2, subds. (a) & (b).)

When seeking to compel arbitration of a plaintiff’s claims, the defendant must allege the existence of an agreement to arbitrate.  (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 219 (Condee).)  The burden then shifts to the plaintiff to prove the falsity of the agreement.  (Ibid.)  After the Court determines that an agreement to arbitrate exists, it then considers objections to its enforceability.  (Ibid.)  The Court must grant a motion to compel arbitration unless the defendant has waived the right to compel arbitration or if there are grounds to revoke the arbitration agreement.  (Ibid.; Code Civ. Proc., § 1281.2.)

A.    Applicability of Federal Arbitration Act (FAA)

The Federal Arbitration Act (“FAA”) applies to agreements to arbitrate disputes arising from a contract involving interstate commerce and it preempts all state laws and rules that conflict with its provisions or its objective of enforcing arbitration agreements.” (Acquire II, supra, 213 Cal.App.4th at p. 968; see 9 U.S.C. § 2 [FAA applies to a “contract evidencing a transaction involving commerce”].)

The United States Supreme Court has interpreted “involving commerce” as the functional equivalent of “affecting commerce,” even where the parties did not contemplate an interstate commerce connection. (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 281.) The commerce clause power could be exercised to preempt state law without showing any effect upon interstate commerce if, in the aggregate, the economic activity represents “‘a general practice ... subject to federal control.’” (Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56-57.) “Only that general practice need bear on interstate commerce in a substantial way.” (Ibid.)

Here, Housekeeps claims that FAA governs the agreement, which Plaintiff and it signed and entered into a formally written contract, known as the Private Nursing Care Services Agreement (the “Agreement”), where Housekeeps was contracted to provide Plaintiff’s father, Timothy Swihart, with personal care, companion, and certified nursing aide and other services. (Roda Decl. ¶ 4, Mot. Ex. “B.”)

In response, Plaintiff counters that the FAA does not apply, claiming the Agreement does not involve interstate commerce – a requisite for FAA application. The Plaintiff argues that Housekeeps has failed to meet its burden of demonstrating that the subject matter of the agreement involves interstate commerce. (Lane v. Francis Capital Management LLC (2014) 224 Cal.App.4th 676, 687; Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 234, 238.)

The Court recognizes that both the FAA and the California Arbitration Act (Code Civ. Proc., § 1280 et seq.) “strongly favor arbitration” (Prima Donna Development Corp. v. Wells Fargo Bank, N.A. (2019) 42 Cal.App.5th 22, 35), and “establish[ ] ‘a presumption in favor of arbitrability.’” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125.)

However, given that Housekeeps has not effectively presented evidence establishing the contract has a substantial relationship to interstate commerce, the Court agrees with Plaintiff’s position that Housekeeps, as the party asserting the FAA, has failed to meet its initial burden, and the Court cannot conclude that FAA governs this case.

The Court will therefore continue to evaluate the enforceability of the Arbitration Clause within the Agreement, pursuant to Code of Civil Procedure section 1281.2 and legal principals outlined in California case law.

B.     Existence of An Arbitration Agreement and Covered Claims

Housekeeps has attached the Agreement to its Motion, wherein the arbitration clause states, “(a) Any controversy arising from/under this Agreement shall be resolved by binding arbitration. (b) Attorney’s fees, costs, and all expenses, related to any arbitration proceeding, that arise from this Agreement, shall be paid by non-prevailing party. If the decision of the arbitrator does not clearly delineate, who the prevailing party is, the arbitrators shall decide which party shall bear all the cost, expenses and attorney’s fees incurred by both parties.” (Mot. Ex. “B,” ¶ 9.)

Plaintiff does not dispute the validity of the Agreement. Nor does Plaintiff argue that the claims in the FAC do not arise from or under the Agreement.

Thus, the Court determines that an agreement to arbitrate exists, and moves to consider Plaintiff’s objections to the enforcement of the Arbitration Clause – namely, the Arbitration Claim does not bind Defendant Kumar, being a nonsignatory to the Agreement, and the case cannot be bifurcated between Kumar and Housekeeps. (Opp’n. at pp. 4-5.)

C.    Potential for Inconsistent Rulings

“While there is a strong public policy in favor of arbitration, there is an ‘equally compelling argument that the Legislature has also authorized trial courts to refuse enforcement of an arbitration agreement [or to stay the arbitration] when, as here, there is a possibility of conflicting rulings.’” (Fitzhugh v. Granada Healthcare & Rehabilitation Center, LLC (2007) 150 Cal.App.4th 469, 475.)

Pursuant to Code of Civil Procedure section 1281.2, subdivision (c), a third-party litigation exception permits a court to refuse to compel arbitration of a controversy that is within the scope of a valid arbitration agreement if “it determines that: ... (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2, subd. (c); see also Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967–968.) (Underlines added.) For purposes of section 1281.2, “a third party is one who is neither bound by nor entitled to enforce the arbitration agreement.” (Daniels v. Sunrise Senior Living, Inc. (2013) 212 Cal.App.4th 674, 679.) 

Here, it is uncontested that Kumar is a nonsignatory to the Agreement. The FAC alleges that Kumar entered into a separate written agreement with Plaintiff. (FAC, ¶ 24.) There is no evidence showing that Kumar is bound by or entitled to enforce the Arbitration Clause in the Agreement entered by Plaintiff and Housekeeps.

Thus, the Court determines that Kumar is a third party for the purpose of Code of Civil Procedure section 1281.2, subdivision (c).

Furthermore, the Court finds that the proposed arbitration between Housekeeps and Plaintiff raises a risk of conflicting rulings on common issues of law and fact.

Here, both parties acknowledge that the claims against Defendants Housekeeps and Kumar involve the same set of facts and law. Resolution of these common questions in different forums presents the possibility of inconsistent rulings on those issues. For instance, in an arbitration, the arbitrator might determine that Housekeeps is not liable for negligence, did not breach the contract or commit elder abuse, and deny relief to Plaintiff, while a trial court might reach a contrary finding against Kumar, who is not subject to an arbitration agreement. Because Kumar in court might be held liable for injuries based on the same conduct that Plaintiff alleges against the arbitrating Defendant Housekeeps — or vice versa — the possibility of conflicting rulings on common issues of law or fact plainly exists.

Therefore, the Court finds that the enforcement of the Arbitration Clause is not justified under the third-party litigation exception, pursuant to Code of Civil Procedure section 1281.2, subdivision (c).

Additionally, Housekeeps maintains that the equitable estoppel doctrine applies when a party has signed an agreement to arbitrate but attempts to avoid arbitration by suing nonsignatory defendants, citing Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1287 (Rowe). However, the Court finds Housekeeps’s reliance on Rowe is misplaced.

The Rowe court expressly held that Code of Civil Procedure section 1281.2, subdivision (c) did not apply to that case because the nonsignatory defendants, who were individual directors sued as alter egos of the defendant corporation, may enforce arbitration of the claims against them, thus they are not “ ‘third parties’ within the meaning of the section 1281.2, subdivision (c).“ (Rowe, supra, 153 Cal.App.4th at p. 1290.)

Here, Housekeeps and Kumar are independent entities and there is no allegation of alter egos. Additionally, there is no allegation or evidence showing that Kumar may enforce or be bound by the Arbitration Clause at issue entered by Plaintiff and Housekeeps. Thus, the Court finds that Code of Civil Procedure section 1281.2, subdivision (c), is applicable in this case, distinguishing it from the governing law in Rowe.

Based on the foregoing, the Court DENIES the Motion to Compel Arbitration based on the application of the third-party litigation exception, under Code of Civil Procedure section 1281.2, subdivision (c).

CONCLUSION

Moving Defendant’s Motion to Compel Arbitration is DENIED.

Moving party to provide notice.