Judge: Mark H. Epstein, Case: 25SMCV00059, Date: 2025-06-05 Tentative Ruling

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Case Number: 25SMCV00059    Hearing Date: June 5, 2025    Dept: I

This is a motion to compel arbitration.  It is more complicated than it looks.  The motion is GRANTED as to Rebecca’s wrongful death claim but is DENIED in all other respects.  The request for a stay is DENIED unless a timely appeal is filed.  If a timely appeal is filed, the case will remain stayed absent a motion to lift the stay, appellate action lifting the stay, or resolution of the appeal.

Plaintiffs are Shirley Lippman by her successor in interest Amy Lippman, as well as Shirley’s daughters Amy Lippman and Rebecca Lippman.  (The court will use first names from this point forward to avoid confusion.  No disrespect is intended.)  The suit alleges elder abuse by defendants as well as causes of action for wrongful death and for survivor actions.  Defendants move to compel arbitration and plaintiffs oppose.  Defendants’ motion is based on an arbitration agreement that was signed when Shirley was admitted to Belmont.  Consistent with California law—which does not permit a facility to demand arbitration as a condition to admit one to the facility—the arbitration agreement was a separately signed document and states conspicuously and expressly that admission is not conditioned upon signing the agreement.  The agreement was signed by Rebecca, who had been designated by Shirley under a Health Care Directive.  The arbitration agreement was broadly worded and included virtually all disputes.  Excepted from the agreement were disputes that could be resolved in Small Claims Court or unlawful detainer actions.  Any dispute was to go to mediation first (for which defendants would pay) and, if mediation was not successful, to arbitration (for which the fees would be divided).  The agreement states that it is binding on Shirley as well as her family.  The agreement also stated that the person signing the agreement, Rebecca, represented that she had the authority to do so.  Rebecca signed on Shirley’s behalf and also as Shirley’s attorney-in-fact pursuant to the Health Care Directive as well (perhaps) as a more general Power of Attorney that Shirley had earlier signed.  Defendants contend that this is enough to send the case to arbitration.  Plaintiffs oppose the motion on a couple of grounds.  The principal ground, though, is that Rebecca lacked the authority to bind Shirley or anyone else to the arbitration agreement, and therefore there is no valid agreement to enforce.

This dispute is resolved as a matter of contract interpretation.  The contract to be interpreted, though, is not really the arbitration agreement; it is the two documents by which Shirley invested Rebecca with certain powers: the Health Care Directive and (perhaps) the Power of Attorney.  Defendants contend that Rebecca had sufficient authority under both while plaintiffs contend that Rebecca had sufficient authority under neither.  Contract interpretation is a matter for the court to decide, not the factfinder, as a general matter.  The only exception is where there is conflicting parol evidence.  If that is the case, then generally a fact-finder would have to resolve the factual dispute.  However, even in that context, it is for the court, not a jury, to make the determination when deciding whether a matter is to be arbitrated.  (Wolf v. Superior Court (2004) 114 Cal.App.4th 1343.)

But while contract interpretation is for the court to decide, the court does not write on a clean slate.  Our Supreme Court provided very helpful guidance in this area in a recent decision: Harrod v. Country Oaks Partners, LLC (2024) 15 Cal.5th 939.  That case had a number of factual similarities to the case at bench.  There, an elderly person was admitted to a facility.  His nephew had been designated under a Health Care Directive.  As part of the admissions process, the nephew signed an arbitration agreement.  Like the agreement here, agreeing to the arbitration agreement was not a condition for admission to the facility.  The plaintiff there sued based on the treatment at the facility and the facility moved to compel arbitration.  The trial court denied the motion and the Court of Appeal affirmed.  The Supreme Court took review to resolve a conflict and affirmed.  In interpreting the contract, the Court did not rely solely on the contract’s language.  Rather, the Court interpreted the contract through the lens of California’s Health Care Decisions Law (HCDL), codified at Probate Code section 4600 et seq.  That law was directed to giving the designated person the right to make health care decisions, which is a defined term under the statute.  Those decisions dealt with things like consenting to treatment or medical care, choosing or rejecting a doctor, and other things that go specifically to the kind of care that would be given to the individual making the designation and other closely related decisions.  Given that focus, the Court concluded, decisions about potential future litigation would not be covered.  Those sorts of decisions are not decisions about medical care; they are litigation decisions.  Whether a person will arbitrate a claim should one arise is, the Court concluded, of a kind and substantially different than deciding, for example, whether a particular doctor should perform a given procedure.  Thus, even though the arbitration agreement was signed as part of the admissions package, and even though the admission to the facility would be covered within the Health Care Directive, the arbitration agreement fell outside of the normal scope of authority to make health care decisions, as the term is defined in the HCDL.

Defendants contend, though, that the Court’s ruling in Harrod was not meant to be a blanket rule.  Rather, defendants note, the Court engaged in an analysis of the Directive’s actual terms.  While in that case the terms did not encompass agreeing to arbitration, that does not mean that a document could not be written that would.  This court agrees with the defendants on that point as a general proposition of law.  The court does not think that the Supreme Court meant to say that a person signing a Health Care Directive could not give the designee the right to agree to an arbitration provision as part of either medical treatment or admission to a facility.  What the Court said was that the one at issue in Harrod did not do so and that such a power would not generally be part of a Health Care Directive that essentially followed the HCDL.  So, defendants argue, the court must look at the particular language here.  That is the correct question and so the court turns to the actual Directive.  Defendants point to one clause in that directive: Paragraph 1(f).  That document gave Rebecca the power to “sign, execute, deliver and acknowledge any contract or other document that may be necessary, desirable or proper in order to exercise any of the powers” described in that agreement.  But this court, as did our Supreme Court, must look at context, not only language.  The Directive here is titled a “Durable Power of Attorney for Health Care” and cites to the applicable provisions of the Probate Code, just like the one in Harrod.  Defendants contend that the language in paragraph 1(f) is broader than the language in Harrod and gave Rebecca the power to sign collateral agreements relating to health care decisions.  The court does not agree.  As was the case in Harrod, the court must look at this power through the lens of health care decisions.  It must be a contract that is necessary, desirable, or proper “in order to exercise any of the powers described in this Paragraph 1 and to pay reasonable compensation or costs . . . relating to my health care.”  The court does not believe that this general language was meant to greatly broaden the normal scope of designated powers.  For the same reasons that the Court in Harrod concluded that the clause there did not extend to litigation decisions that might or might not arise in the future, it does not do the trick here.  (The court notes that defendants’ reliance on Garrison v. Superior Court (2005) 132 Cal.App.4th 253 and Hutcheson v. Eskaton FountainWood Lodge (2017) 17 Cal.App.5th 937 are not convincing.  Hutcheson was disapproved in Harrod, as was the reasoning in Garrison.)

But defendants also rely on another provision.  That provision is section 6 of a mystery document.  The court says it is a “mystery” document because the cover page is missing.  However, from its form, it appears to be a more general Power of Attorney form.  As a preliminary matter, the court cannot rely on this document.  It is plainly not part of the Health Care Directive—that much is obvious from its format and that it has a different internal document number.  It is not complete.  And, critically, it is missing the signature page, so the court does not know whether this is a draft or the final version.  To avoid a multiplicity of motions, though, the court will assume that if given a chance defendants would be able to take care of those problems and discuss what the court’s ruling would be were such to be the case.  This is not final, though, as the court does not know if there are other terms in this document that might affect the court’s reasoning or whether this is actually a Power of Attorney.  But with that assumption, section 6 is entitled “General Powers.”  It states that the designee (whom the court assumes, but does not know, is Rebecca) may “prosecute or defend against any cause of action . . . which I may have . . . before any court, administrative body or other tribunal, and to agree to any settlement or compromise thereof; and to discontinue, abandon or dismiss any such action or claim.”  If this is what the court thinks it is, it is not sufficient.  Rather, this is a power to deal with litigation once filed or to prosecute litigation once the claim has arisen.  It does not read like the right to enter into pre-dispute arbitration agreements, or at least standalone arbitration agreement.  (The court is not as clear whether such would be the case, for example, if Rebecca were to sign a listing agreement to sell real property—something she could do under section 7—that contained within the contract an arbitration provision.  That is not before the court.)

It is not clear, but defendants might also be relying on section 6 of the Health Care Directive, which allows a third party to rely on actions by the designee.  But those actions all must be actions within the scope of the Directive.  This, as discussed above, is not.

Defendants also contend that Rebecca’s signature is valid to bind Shirley under agency principles.  The court disagrees.  While it is true that an agency can be ostensible, the principal must bear some fault for the situation for that doctrine to apply.  Here, Shirley signed a directive giving Rebecca authority in certain circumstances.  But that document did not give rise to this issue in a legally cognizable way any more than did the directive in Harrod.

The court has some sympathy, though, for defendants here.  Rebecca, after all, represented that she had the power to sign the contracts that she signed.  It seems a bit unfair for her now to say—without any change in the facts—that she lacked such power.  The problem is that it is not Rebecca’s thought process that is at issue.  She might well be estopped from asserting a lack of power.  But the real issue is Shirley.  She is not estopped, for she made no representation and, by definition, she could not have done so.  The court also notes that the arbitration agreement was signed in 2013—before the Harrod decision came out (although there were other cases percolating through at the time.)  So it is hard to fault defendants here.  In fact, the court is at a loss to know what defendants could have realistically been expected to do differently.  Worse, it would appear that this is a one-way agreement at this point.  If plaintiffs had decided in this litigation that they did want to arbitrate but defendants did not, it might well be that their motion to compel would be granted, for defendants plainly did have authority to sign. 

But be that as it may, it does not appear that Shirley is bound to the arbitration agreement.  And, because Rebecca lacked the authority to bind Amy (something that would have been true even if Rebecca could bind Shirley), Amy is likewise not bound by the contract.  That means that causes of actions brought by Shirley or her successor are not subject to the agreement.  It also means that actions by Amy in her own right are not subject to arbitration.  The motion is DENIED to that extent.

The situation is a bit different as to causes of action by Rebecca in her own right.  Rebecca actually signed the arbitration agreement.  She made the representation that she could sign it.  And the agreement specifically states that it is binding on all parties to it, including Rebecca, who signs.  And it says that Rebecca was signing not only in a representative capacity for Shirley, but also in Rebecca’s individual capacity and thus any claims brought by Rebecca “individually” are subject to arbitration.  That is enough to bind Rebecca.  The motion is GRANTED as to Rebecca’s wrongful death claim.

Rebecca also argues that the agreement is unconscionable.  The court cannot agree.  First, the court sees no procedural unconscionability at all.  The agreement was not a condition of admission; Rebecca could have elected not to sign and not to arbitrate and Shirley still would have been admitted to the facility.  And that was not a hidden thing.  It states at the top in bold capital letters the word “OPTIONAL.”  And in bold, it states at the same place that signing the agreement “is not a precondition of the admission to or furnishing of services.”  And there was a 15 day rescission period after the signature.  The document was a standalone document; it was not buried in fine print.  It required a separate signature.  Although it was signed electronically, that does not make it procedurally unconscionable.  It simply is not the case that every time the parties are of unequal bargaining power there is procedural unconscionability.  Nor—as to this term—was there unequal bargaining power.  The bottom line is that our Legislature did not want to condition admission on arbitration, and wanted to be sure that parties to an admission agreement were well aware that it was optional.  The Legislature accomplished its mission.  It is plainly optional as to anyone who reads it, and it is written in clear English.  That’s the upside.  The downside is that the procedural unconscionability defense is not available.  Nor does the court see substantive unconscionability—at least as to Rebecca.  It is not unconscionable to split the arbitration fee.  It might be unconscionable if one side knows that the other cannot afford to arbitrate, but there is no evidence that such was known at the time the agreement was signed.  In fact, the court is not sure there is any reason to believe it now.  It might also be substantively unconscionable if it burdens a fundamental right.  The court might well find it to be unconscionable if Shirley (or her successor) could not sue for elder abuse absent burdening her with the arbitration costs, just like one cannot force an employee to arbitrate a discrimination claim and pay the added costs.  But that is not at issue here; only Rebecca’s wrongful death action.  While a wrongful death claim is a valid cause of action, the court does not see that it reflects so fundamental a public policy that the fee splitting provision is substantively unconscionable.  And finally, it is not unconscionable on the theory that small claims and UD matters are excluded.  The small claims matter exclusion works both ways, and it makes sense given that the procedures are so streamlined in small claims matters.  As to the UD exclusion, the problem is that an arbitrator cannot issue a writ of possession and an arbitrator is not necessarily bound by the UD timing provisions in the statute.  It is not unreasonable to exclude that.  (Bickel v. Sunrise Assisted Living (2012) 206 Cal.App.4th 1.)

Finally, there is a question whether to stay the action in court until Rebecca’s wrongful death action is decided.  The request for a stay is DENIED.  Rebecca’s wrongful death action is the tail on the dog here.  Moreover, while there is a risk of inconsistent judgments in the sense that defendant might win the arbitration but lose at trial, that is not enough under 1281.2.  The court is usually concerned where it goes the other way.  Where a plaintiff might lose at the arbitration and the trial not because the plaintiff is not entitled to a recovery, but rather because the plaintiff is suing two different defendants who each point at the empty chair.  Although the request for a stay is denied, the court is aware that this is an appealable order.  If a timely appeal is filed, then the matter will be STAYED AUTOMATICALLY pending: (1) a motion in this court to lift the stay that is granted; (2) an order from the Court of Appeal lifting the stay; (3) resolution of the appeal; or (4) further order of the court.