Judge Jill Feeney, Case Number: 22STCV16823, Date: 2023-10-12 Tentative Ruling

On May 20, 2022, Plaintiffs Louis Juarez and Elisa Ester Vargas filed their Complaint against Defendants Kaiser Foundation Health Plan, Inc., Kaiser Foundation Hospitals, Kaiser Permanente Insurance Corp., Marcie Louise Carter D.P.M., Maribel Munoz, M.D., Elixabeth Ann Rupp, M.D., Igor Sapozhnikov, M.D., SO. CA. Permanente Medical Group, and Michelle Marie Turner, M.D.

Movants move to compel arbitration pursuant to an arbitration agreement contained in Group Agreement and Combined Disclosure Form and Evidence of Coverage (“Agreement”) which Plaintiff Juarez’s employer, Bondy Haney Services, Inc. accepted on behalf of Juarez and his spouse Vargas. Juarez then signed a Medical Enrollment application electing to be covered under his employer’s plan.

California law reflects a strong public policy in favor of arbitration as a relatively quick and inexpensive method for resolving disputes. To further that policy, California Code of Civil Procedure section 1281.2 requires a trial court to enforce a written arbitration agreement unless one of three limited exceptions applies. Those statutory exceptions arise where (1) a party waives the right to arbitration; (2) grounds exist for revoking the arbitration agreement; and (3) pending litigation with a third party creates the possibility of conflicting rulings on common factual or legal issues.” (Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 967 [citations omitted]; Code Civ. Proc. § 1281.2.)

In deciding a petition to compel arbitration, trial courts must decide first whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 961.) The party seeking arbitration has the “burden of proving the existence of a valid arbitration agreement by a preponderance of the evidence, while a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836, 842.) The trial court “sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence, and any oral testimony the court may receive at its discretion, to reach a final determination.” (Id.) General principles of contract law govern whether parties have entered a binding agreement to arbitrate. (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236; see also Winter v. Window Fashions Professions, Inc. (2008) 166 Cal.App.4th 943, 947.)

Whether there is a written agreement to arbitrate is a matter of contract, and courts must enforce arbitration contracts according to their terms. (Banc of California, National Association v. Superior Court of Los Angeles County (2021) 69 Cal.App.5th 357, 366.) A party cannot be required to submit to arbitrate any dispute to which he has not agreed to arbitrate. (Id.)

A nonsignatory may also be compelled to arbitrate a dispute when the nonsignatory is a third-party beneficiary of the contract containing the arbitration agreement. (See Epitech, Inc. v. Kann (2012) 204 Cal.App.4th 1365, 1371.) A nonsignatory must be determined to be a third-party beneficiary in order to be bound by the arbitration agreement. (See id.) The contract must show an intent by the contracting parties to confer a benefit on the third party. (Id. at 1372.) “‘[I]t is not enough that the third party would incidentally have benefited from performance.’” (Id. (quoting Souza v. Westlands Water Dist. (2006) 135 Cal.App.4th 879, 891).)

I understand that, if I select a Health Plan that uses mandatory binding arbitration to resolve disputes, I am agreeing to arbitrate claims that relate to my or a dependent’s membership in the Health Plan…I understand that any dispute between myself, my heirs, relatives, or other associated parties for alleged violation of any duty arising out of or related to membership in the Health Plan, including any acclaim for medical or hospital malpractice…must be decided by binding arbitration under California law and not by lawsuit or resort to court process, except as applicable law provides for judicial review or arbitration proceedings. I agree to give up our right to a jury trial and accept the use of binding arbitration. I understand that the full arbitration provision is in the Health Plan ‘s coverage document, which is available for my review.

• The claim arises from or is related to an alleged violation of any duty incident to or arising out of or relating to this EOC or a Member Party's relationship to Kaiser Foundation Health Plan, Inc. ("Health Plan"), including any claim for medical or hospital malpractice (a claim that medical services or items were unnecessary or unauthorized or were improperly, negligently, or incompetently rendered), for premises liability, or relating to the coverage for, or delivery of, services or items, irrespective of the legal theories upon which the claim is asserted

• Any employee or agent of any of the foregoing "Claimant" refers to a Member Party or a Kaiser Permanente Party who asserts a claim as described above. "Respondent" refers to a Member Party or a Kaiser Permanente Party against whom a claim is asserted.

Juarez elected for him and his dependents to receive healthcare coverage with Kaiser Permanente. (Motion, Exhibit C.) Although Vargas was not a signatory to the Agreement or the form electing coverage, Vargas benefitted under the Agreement because she received health insurance coverage after Juarez accepted coverage on her behalf. Vargas’s name appears among the members to be covered under the insurance plan. (Id., p.1.) The Agreement and healthcare coverage form both state the agreement is binding on Juarez, and his relatives. Because the Agreement and healthcare coverage form both explicitly benefit and include Vargas, she is a third-party beneficiary to the Agreement and the form.

The arbitration agreement covers disputes, including medical malpractice, between Members and Kaiser Parties, including Southern California Permanente Medical Group. The subject dispute is covered by the agreement because Plaintiff’s’ claims are for medical negligence arising from Vargas’s treatment at Kaiser Permanente/Southern California Permanente Medical Group.

Plaintiffs argue that the arbitration agreement cannot exist because Juarez is a Spanish speaking individual with no literacy in English who could not have understood the arbitration clause. Plaintiffs cite Code Civ. Proc., section 1281, which provides that arbitration agreements are generally “valid, enforceable, and irrevocable, save upon such grounds as exist for the revocation of any contract.”

However, the fact that Plaintiff may not have read the Terms of Use does not mean that Plaintiff is not bound to the Terms, including its arbitration provision. The applicable rule is that someone who agrees to a contract without reading it is bound by its terms. (Ramos v. Westlake Services LLC (2018) 242 Cal.App.4th 674, 686.) Here, Plaintiff states that Plaintiff does not speak, read, write, or understand English.

“‘Ordinarily, one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he has not read it. If he cannot read, he should have it read or explained to him.” (1 Witkin, Summary of Cal. Law (9th ed. 1987), § 120, p. 145.) This is not only the California but the general rule. (3 Corbin, Contracts (1960) § 607, pp. 668–669 [“One who signs an instrument when for some reason, such as illiteracy or blindness, he cannot read it, will be bound by its terms in case the other party acts in good faith without trick or misrepresentation. The signer should have had the instrument read to him.’”] as cited in Randas v. YMCA of Metropolitan Los Angeles (1993) 17 Cal.App.4th 158, 163.)

Here, assuming arguendo that Juarez cannot read or understand English, that fact does not preclude Plaintiffs from being bound by the terms of the Agreement because Juarez knew he was consenting to something, and the onus was on Juarez to have someone translate or explain what terms he was assenting to. The fact Juarez could not read and understand English is not proof that Plaintiff lacked the capacity to contract and consent to the Agreement, including waiver of a right to a jury trial.

Health and Safety Code, section 1363.1 provides that “any health care service plan that includes terms that require binding arbitration to settle disputes and that restrict, or provide for a waiver of, the right to a jury trial shall include, in clear and understandable language, a disclosure that…clearly state[s] whether the plan uses binding arbitration to settle disputes, including specifically whether the plan uses binding arbitration to settle claims of medical malpractice.”

Code Civ. Proc., section 1295 provides that “Any contract for medical services which contains a provision for arbitration of any dispute as to professional negligence of a health care provider shall have such provision as the first article of the contract and shall be expressed in the following language: “It is understood that any dispute as to medical malpractice, that is as to whether any medical services rendered under this contract were unnecessary or unauthorized or were improperly, negligently or incompetently rendered, will be determined by submission to arbitration as provided by California law, and not by a lawsuit or resort to court process except as California law provides for judicial review of arbitration proceedings. Both parties to this contract, by entering into it, are giving up their constitutional right to have any such dispute decided in a court of law before a jury, and instead are accepting the use of arbitration.”

Here, the arbitration agreement clearly states Plaintiffs’ health plan uses arbitration to settle disputes, including claims of medical malpractice. The agreement also contains the terms required under Code Civ. Proc., section 1295. There are no defects here with the terms of the agreement.

The doctrine of unconscionability 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.”¿¿(Sonic-Calabasas A, Inc. v. Moreno (2013)¿57 Cal.4th 1109, 1133.) It consists of procedural and substantive components, “the former focusing on oppression or surprise due to unequal bargaining power, the latter on overly harsh or one-sided results.”¿¿Id.¿ Although both components of unconscionability must be present to invalidate an arbitration agreement, they need not be present in the same degree.¿(Armendariz v. Found. Health¿Psychcare¿Servs., Inc. (2000)¿24 Cal.4th 83, 114 (abrogated in-part on other grounds by¿Concepcion, 563 U.S. 333).)¿¿¿

“Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.¿ [Citations.]¿ In other words, the more substantively unconscionable the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”¿¿(Id.) “The party resisting arbitration bears the burden of proving unconscionability.”¿(Pinnacle Museum Tower¿Ass’n¿v. Pinnacle Market Dev. (US) (2012) LLC,¿55 Cal.4th 223, 247.¿

Procedural unconscionability “pertains to the making of the agreement.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 795.) Procedural unconscionability “focuses on two factors: ‘oppression’ and ‘surprise.’ ‘Oppression’ arises from an inequality of bargaining power which results in no real negotiation and ‘an absence of meaningful choice.’ ‘Surprise’ involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the prolix printed form drafted by the party seeking to enforce the disputed terms.” (Zullo v. Superior Court (2011) 197 Cal.App.4th 477, 484.) “The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party's review of the proposed contract was aided by an attorney.”¿¿(Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc.¿(2015) 232 Cal.App.4th 1332, 1348, fn. omitted.)¿

A contract of adhesion typically denotes a standardized contract imposed and drafted by the party of superior bargaining strength which relegates to the subscribing party only the opportunity to adhere to the contract or reject it. (Armendariz, supra, 24 Cal.4th at 113.) The adhesive nature of a contract is one factor that the courts may consider in determining the degree of procedural unconscionability. (Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 84 fn.4.)

Here, Plaintiffs argue that Juarez was rushed into signing the health insurance package because the deadline was pending. He testifies that he cannot read and write English and that he was rushed to sign and date paperwork to continue having health insurance coverage before a deadline passed. (Juarez Decl., ¶¶3, 7, 8.) He was not given the opportunity to take the package home and have someone translate it to him in Spanish. (Id., ¶10.) No one explained the arbitration clause to him and he had no understanding that he was signing a mandatory arbitration agreement. (Id., ¶¶12-13.)

Plaintiffs cite Carmona v. Lincoln Millennium CarWash, Inc. (2014) 226 Cal.App.4th 74, 85, as well as other cases that provide a lack of access to a version of the contract in a language the signer could understand amounted to procedural unconscionability.

Here, Juarez’s declaration shows that he could not read or write English and was not given a Spanish translation of the Agreement or the healthcare coverage form. He was also given a deadline to sign the forms. Although Juarez cannot specify what the deadline was, he was pressured to sign the paperwork quickly to continue having healthcare coverage. Additionally, the Agreement and form are both contracts of adhesion because Juarez only had the option to adhere to the arbitration clause or reject coverage with Kaiser. Although Juarez could have chosen a different insurance plan, the healthcare coverage form itself presented the arbitration clause on a take it or leave it basis. These factors show that the arbitration agreement was procedurally unconscionable.

An agreement is substantively unconscionable if it imposes terms that are “overly harsh,” “unduly oppressive,” “unreasonably favorable,” or “so one-sided as to ‘shock the conscience.’”¿(Sanchez v. Valencia Holding Co., LLC¿(2015) 61 Cal.4th 899, 910-911¿(Sanchez).)¿“All of¿these formulations point to the central idea that unconscionability doctrine is concerned not with ‘a simple old-fashioned bad bargain’ [citation], but with terms that are ‘unreasonably favorable to the more powerful party.’ [Citation.]”¿(Id. at p. 911.)¿“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.’ ”¿(Id. at p. 911.)

Here, the Agreement states that Arbitrations shall be conducted according to Kaiser’s arbitration rules developed by its Office of the Independent Administrator. (Motion, Exhibit A, p.133.) Arbitration would be conducted by a neutral arbitrator and each party was to bear their own costs. (Id., p.134.) Arbitrations were to be governed by the Agreement, the Federal Arbitration Act, and the California Code of Civil Procedure provisions relating to arbitration. (Id., p.135.)

There are no provisions in the agreement which are overly harsh, unduly oppressive, or so one-sided as to shock the conscience. Plaintiffs fail to identify any portion of the agreement that is substantively unconscionable. Although Plaintiffs reiterate their arguments that Juarez could not read English, signed the documents in a rush, and could not understand the terms of the contract, these factors go toward procedural unconscionability, not substantive unconscionability. Thus, the Court finds that the arbitration agreement is not substantively unconscionable.