Judge: Mark C. Kim, Case: 22STCV17258, Date: 2023-03-23 Tentative Ruling

Case Number: 22STCV17258    Hearing Date: March 23, 2023    Dept: S27

1.     Background Facts

Plaintiffs, Joanne Abate, deceased, by and through her successors-in-interest, David Abate, Mandy Lyn Keller, and Cassandra Lyn Hainley, as well as David Abate, Mandy Lyn Keller, and Cassandra Lyn Hainley in their individual capacities, filed this action against Defendants, Covenant Care Long Beach, Inc., Covenant Care California, LLC, Covenant Care, LLC, Covenant Subco, LLC, and Covenant Holdco, LLC for negligence/willful misconduct, elder abuse and neglect, violation of the patients’ bill of rights, and wrongful death. 

 

The case was originally assigned to the personal injury hub court, where the motion to compel arbitration and companion motion to stay action were fully briefed.  The case was then transferred to the Long Beach Courthouse as complicated, and the matter is currently ripe for determination. 

2.     Motion to Compel Arbitration

a.     Issues Presented

Defendants move to compel the entire case into arbitration, contending Decedent signed an arbitration agreement upon admission to their facility.  Plaintiffs oppose the motion, arguing:

·         Defendants failed to establish Decedent signed the subject agreement;

·         The agreement is unconscionable;

·         The wrongful death claim is not subject to arbitration;

·         The patients’ bill of rights claim is not subject to arbitration;

·         The presence of nonarbitrable claims of third parties presents the possibility of conflicting rulings, such that arbitration should be denied entirely.

 

The Court will rule on each issue in turn. 

 

b.     Evidentiary Objections

Plaintiffs submitted objections with their opposition papers.  As will be more fully explained below, the objections are overruled.

 

c.     Electronic Signature

Plaintiffs, in their opposition papers, rely on Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 171 to support their position that Defendants failed to show the document was signed.  Gamboa, however, did not involve electronic signature.  The Court has instead relied upon Fabian v. Renovate America, Inc. (2019) 42 Cal.App.5th 1062, Espejo v. Southern California Permanente Medical Group (2016) 246 Cal.App.4th 1047, and Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836.  These three cases, collectively, are the most recent appellate level cases concerning electronic signature on an arbitration agreement.

The cases explain that there is a three-step process used to determine the arguments regarding electronic signatures and denials.  Defendant meets its initial burden to show an agreement to arbitrate by attaching a copy of the contract to its petition, which purportedly bears the plaintiff's electronic initials and signature.  Espejo at 1057.  The burden shifts to the plaintiff, who declares that she/he did not sign the contract.  The burden then shifts back to the defendant, which has the burden of proving by a preponderance of the evidence that the electronic signature was authentic. The defendant’s burden of authenticating an electronic signature is not great. Ruiz at 844.  The party seeking authentication may carry its burden in any manner, including by presenting evidence of the contents of the contract in question and the circumstances surrounding the contract's execution. Id.

 

In this case, Defendants clearly meet their moving burden.  It is questionable whether Plaintiffs meet the opposition burden, as the person who purportedly signed the document is deceased, so she cannot declare she did not sign the document.  Even if she had done so, Defendants clearly meet their reply burden.  Defendants have submitted both the Declaration of Derrick Young and Veronica San Diego.  Young explains both his custom and practice at and around the time Decedent was admitted to the facility, as well as what he did with Decedent personally in connection with obtaining her signature on the subject documents.  While Plaintiffs make much as Young referring to the agreement as an “arbitration agreement” in this declaration vs. its title as a “dispute resolution agreement,” the Court finds this is a distinction without a difference, as the dispute resolution agreement clearly provides for arbitration of disputes.  Additionally, San Diego, in her moving declaration, explains the procedure for creating business records and authenticates Decedent’s signed arbitration agreement.  To the extent Plaintiffs voice concerns that the records are not date- and/or time-stamped, she provides the audit trail with her reply papers.  The Court is satisfied that Decedent electronically signed the subject agreement.

 

b.         State Law or FAA

Plaintiffs next argue state law, as opposed to the FAA, control the analysis in this case.  They argue this is so because the parties’ agreement, which includes a provision making clear that the FAA governs, is not a binding contract for the reasons stated above.  This argument is rejected for the reasons stated above.

 

Plaintiffs also argue the provision in the parties’ contract providing for the use of FAA rules is not sufficiently clear, and therefore FAA rules cannot be applied.  In opposition, Defendants argue the parties’ contract provides that the FAA governs, but they also argue this is of no moment, because federal law makes clear that the FAA governs whenever a contract involves “commerce.”

 

The Court has reviewed the Rutter Guide on Alternative Dispute Resolution, §§5:46, et seq., and finds that Defendants have mis-stated the law.  Pursuant to 9 USC §§1-14, the FAA governs contractual arbitration in written contracts involving interstate or foreign commerce or maritime transactions.  Defendants have failed to show that the parties’ contract implicated interstate commerce, as opposed to simply intrastate commerce.  It seems that Decedent entered into a contract for care in her home state, and therefore interstate commerce is not implicated.  Pursuant to Woolls v. Superior Court (2005) 127 Cal.App.4th 197, 211-214, while the term interstate commerce is broadly defined to include most forms of commerce, the party asserting preemption has the burden of proof on the issue.  Defendants herein have presented no evidence that Decedent’s contract implicated interstate commerce, and therefore this argument fails. 

 

Pursuant to Lane v. Francis Capital Mgmt. LLC (2014) 224 Cal.App.4th 676, 687-688, absent evidence of interstate commerce, the language of the parties’ contract governs the analysis.  Thus, the issue is whether the parties’ contract makes clear that the FAA governs the procedural aspects of the parties’ dispute.  The parties’ contract is attached as Exhibit B to the Declaration of Young, submitted with the moving papers.  §9 provides, “Notwithstanding any other provision in this Agreement, this Agreement shall be construed and enforced in accordance with and governed by the FAA and not California law…The Parties specifically acknowledge the applicability of the FAA and other applicable federal law to any petition for enforcement of the arbitration provisions of this Agreement.  Submission of any dispute under this Agreement to arbitration may only be avoided as specifically allowed by the FAA.”

 

Plaintiffs argue CA law governs the procedural aspects of the parties’ dispute, because the arbitration agreement does not specify that the FAA’s procedural rules apply.  When reading the parties’ contract, however, it is clear that the parties intended the FAA to govern all aspects of the parties’ dispute, including procedural aspects.  Indeed, the agreement provides that the FAA applies to a “petition for enforcement” of the parties’ agreement, and it is not clear what this could possibly mean other than the procedural aspects of the filing of such a petition.  When the entirety of the provision is read together, it is clear that the FAA is intended to govern all aspects, including procedural aspects, of the parties’ arbitration agreement.  Plaintiffs do not cite any portion of any case in their opposition indicating some sort of buzz word, such as “procedural,” must be specifically included in the agreement in order to ensure the FAA governs the procedural aspects of the case. 

 

The Court therefore finds the FAA governs this petition.

 

d.     Unconscionability

I.              General Law Governing Unconscionability

A contract will be found to be unconscionable where: (1) it is adhesive, in that all or part of the contract falls outside the reasonable expectations of the weaker party; and (2) equitably, the terms unreasonably favor the other party.  Stirlen v. Supercuts (1997) 51 Cal.App.4th 1519, 1524.  Unconscionability has both a “procedural” and a “substantive” element. 

The procedural element 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.  A contractual term is substantively suspect if it reallocates the risks of the bargain in an objectively unreasonable or unexpected manner.  Procedural unconscionability has to do with matters relating to freedom of assent. 

 

Substantive unconscionability involves the imposition of harsh or oppressive terms on one who has assented freely to them.  The prevailing view is that these two elements must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.  Id., at 1532-1533.  In Stirlen, the court found that an arbitration provision was unconscionable in that included a forced waiver of punitive damages by the plaintiff employee, in violation of Civil Code §1668, and accorded the defendant employer greater rights in pursuing a court action for injunctive or equitable relief. 

 

II.             Procedural Unconscionability

A contract of adhesion meets the threshold definition for procedural unconscionability.  See Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846, 853.  Plaintiffs argue the agreement is procedurally unconscionable because (a) it is a contract of adhesion, (b) the provision providing for arbitration of heirs’ claims is unconscionable, and (c) it is not in compliance with CCP §1295.  Plaintiffs rely on Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174 and Magno v. College Network, Inc. (2016) 1 Cal.App.5th 277, 285 in this regard.

 

Plaintiffs failed to show the contract is one of adhesion.  A contract of adhesion, by definition, is provided on a “take it or leave it” basis.  See Magno at 286.  Young declared Decedent was not required to sign the contract.  Plaintiffs provide no evidence to the contrary. 

 

Nothing in Mercuro or Magno concerns the application of an arbitration agreement to heirs.  Plaintiffs failed to show that signing an agreement that applies to one’s heirs is procedurally unconscionable. 

 

Because Plaintiffs failed to show the agreement is procedurally unconscionable, the Court need not address substantive unconscionability.  The argument that the motion should be denied due to the unconscionability of the parties’ contract is rejected.

 

e.     Non-Signatories

Plaintiffs next argue that the non-signatories to the agreement cannot be compelled to arbitrate their claims.  They therefore contend their claim for wrongful death is not subject to arbitration.  They cite Birl v. Heritage Care, LLC (2009) 172 Cal.App.4th 1313 to support their position.  Plaintiffs are correct.  Notably, in Avila v. Southern Calif. Specialty Care, Inc. (2018) 20 Cal.App.5th 835, 841-843, the Court of Appeals specifically addressed the issue of whether an heir must arbitrate a wrongful death claim arising out of an elder abuse claim, and held that arbitration is NOT required by the heirs in those circumstances.  Defendants, in their reply, cite Marmet Health Care Center, Inc. v. Brown (2012) 565 U.S. 530, 532-533, which made clear that the FAA preempts a state law precluding arbitration for wrongful death claims.  The issue here, however, is not preemption; the issue is whether the heirs are parties to the arbitration agreement.  They are not, and therefore under all cited authority in the opposition, they are not obligated to arbitrate their wrongful death claims.

 

f.      CCP §1281.2(c)

Plaintiffs argue there is a risk of inconsistent rulings if their wrongful death claims are litigated and the survival claims are arbitrated.  Defendants argues §1281.2(c) is preempted by the FAA.  They cite no authority for this position.  Pursuant to Volt Information Sciences, Inc. b. Board of Trustees (1989) 489 U.S. 468, 477-479, a court may apply §1281.2(c) notwithstanding the FAA.   

 

Defendants correctly note, however, that CCP §1281.2(c), by its very terms, does not apply to arbitration agreements that comply with §1295.  §1295 governs arbitration of medical malpractice claims.  While Plaintiffs’ survival claim for elder abuse may not be governed by §1295, their survival claim for negligence is so governed, as is their individual claim for wrongful death.  Plaintiffs do not contend the agreement Decedent signed fails to comply with §1295.  The Court therefore finds §1281.2(c) does not apply, and the Court cannot decline to send the arbitrable claims to arbitration even if there is a risk of inconsistent rulings.

 

g.     Violation of Patients’ Rights

Plaintiffs’ final argument is that claims for violation of patients’ rights, which are brought pursuant to Health and Safety Code §1430(b), are not arbitrable.  §1430(b) specifically makes clear that any claim for violation of the Act is not subject to arbitration. 

 

Plaintiffs first argue this is so because state law procedural rules apply and not the FAA.  This argument is rejected for the reasons detailed above.

 

The only case cited by either party that is directly on point is Valley View Health Care, Inc. v. Ronald Chapman (2014) 992 F.Supp.2d 1016 (E.D. Cal.), which held that §1430(b) is preempted by the FAA.  Valley View is a federal district court case and is therefore persuasive only, not controlling.  However, because it is the only case cited by either party on the issue, and because the Court finds its analysis compelling, the Court finds the claims for violation of patients’ bill of rights must be arbitrated despite the language in the Act to the contrary, which is preempted. 

 

h.     Conclusion

The motion to compel arbitration of the wrongful death claims is denied.  The motion to compel arbitration of all other claims is granted.

 

3.     Motion to Stay Action Pending Outcome of Arbitration

CCP §1281.4 provides for a stay of this action pending the outcome of arbitration.  Defendants’ motion for a stay is granted.  Plaintiffs’ claims for wrongful death are stayed pending the outcome of arbitration.  Any action on the arbitrable claims is also stayed pending the outcome of arbitration. 

 

Defendants are ordered to give notice.

 

Parties who intend to submit on this tentative must send an email to the court at gdcdepts27@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If the parties do not submit on the tentative, they should arrange to appear remotely.