Judge: Michael P. Linfield, Case: 22STCV38118, Date: 2023-10-20 Tentative Ruling

Case Number: 22STCV38118    Hearing Date: October 20, 2023    Dept: 34

SUBJECT:        Motion to Compel Arbitration

Moving Party: PIH Health Good Samaritan Hospital

Resp. Party:    Angel Medical Group, Inc., Easy Care MSO, LLC, and Michelle Bui

SUBJECT:        Demurrer to Cross-Complaint

Moving Party: Michelle Bui

Resp. Party:    PIH Health Good Samaritan Hospital

The Motion to Compel Arbitration is GRANTED in part. The Motion is GRANTED as to Easy Care MSO and Bui. The Motion is DENIED as to Angel Medical Group, Inc.  The arbitration is STAYED pending the litigation.

Bui’s Demurrer to PIH’s Cross-Complaint is TAKEN OFF CALENDAR.

The Court sets a Status Conference re Arbitration for the date of trial, October 21, 2024.

BACKGROUND:

On December 7, 2022, Angel Medical Group, Inc. (“AMG”) filed its Complaint against PIH Health Good Samaritan Hospital (“PIH”) on causes of action involving the Parties’ contracts and business dealings.

On March 1, 2023, the Court sustained PIH’s Demurrer solely to the fifth cause of action for declaratory relief in the Complaint.

On May 3, 2023, PIH filed its Answer to the Complaint.

On May 3, 2023, PIH filed its Cross-Complaint (“PIH’s Cross-Complaint”) against AMG, Easy Care MSO, LLC (“ECMSO”), and Michelle H. Bui (“Bui”).

On August 21, 2023, AMG filed its Answer to PIH’s Cross-Complaint.

On August 21, 2023, ECMSO filed its Answer to PIH’s Cross-Complaint.

On August 21, 2023, ECMSO and Bui filed their Cross-Complaint (“ECMSO and Bui’s Cross-Complaint”) against PIH and Ira Meiselman (“Meiselman”).

On August 31, 2023, PIH filed its Motion to Compel Arbitration against AMG, ECMSO, and Bui.

On September 19, 2023, PIH filed its Supplemental Memorandum in support of its Motion to Compel Arbitration.

On September 20, 2023, Bui filed her Demurrer to PIH’s Cross-Complaint.

On September 25, 2023, AMG filed its Opposition to the Motion to Compel Arbitration.

On October 5, 2023, Bui filed her Opposition to the Motion to Compel Arbitration.

On October 9, 2023, PIH filed its Opposition to the Demurrer.

On October 9, 2023, ECMSO filed its Statement of Non-Opposition to the Motion to Compel Arbitration.

On October 12, 2023, Bui filed her Reply regarding her Demurrer.

On October 13, 2023, PIH filed its Combined Reply regarding its Motion to Compel Arbitration.

ANALYSIS:

I.          Motion to Compel Arbitration

A.      Legal Standard

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Code Civ. Proc., § 1281.)

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that 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 it makes certain determinations].” (Code Civ. Proc., § 1281.2.)

“Under both federal and state law, arbitration agreements are valid and enforceable, unless they are revocable for reasons under state law that would render any contract revocable. . . . Reasons that would render any contract revocable under state law include fraud, duress, and unconscionability.” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239, citations omitted.)

“The party seeking to compel arbitration bears the burden of proving by a preponderance of the evidence the existence of an arbitration agreement.¿The party opposing the petition bears the burden of establishing a defense to the agreement's enforcement by a preponderance of the evidence.¿In determining whether there is a duty to arbitrate, the trial court must, at least to some extent, examine and construe the agreement.” (Tiri, supra, at p. 239.)

B.      Discussion

1.      The Parties’ Agreements

PIH submits four contracts for consideration. The Court considers them in chronological order by date of signature.

a.       The Contract Between AMG and ECMSO

The first contract is titled “IPA Administrative Services Agreement.” (Motion to Compel Arbitration, Exh. 3, p. 1.) This contract is signed by AMG on September 19, 2014 and by ECMSO on September 19, 2014. (Id. at p. 13.) Bui signed this contract on behalf of ECMSO as the President/COO of ECMSO, but Bui did not separately sign this contract on behalf of herself. (Ibid.) The contract is not signed by PIH. (Ibid.) This contract contains two dispute resolution clauses. (Id. at pp. 9–10.)

“10.1.  Dispute Resolution.  Unless otherwise agreed. any controversy, dispute or claim arising out of, in connection with, or related to the interpretation, performance or breach of this Agreement shall be resolved by application by either party to a court of the State of California or of the United States with venue and jurisdiction in the State of California, County of Los Angeles.

“-or –

“10.1.  Arbitration.  Any controversy, dispute or claim arising out of, in connection with, or related to the interpretation, performance or breach of this Agreement shall be resolved by final and binding arbitration (the ‘Arbitration’).  The Arbitration shall be initiated and administered by and in accordance with the then existing Rules of Practice and Procedures of Judicial Arbitration and Mediation Services, Inc. (‘JAMS’) or, if JAMS is not in existence, with the Commercial Rules of the American Arbitration Association.  The Arbitration shall be held in Los Angeles County, California, unless the parties mutually agree to have such proceeding in some other locale; the exact time and location shall be decided by the arbitrator(s) selected in accordance with the then existing Rules of Practice and Procedures of JAMS. The arbitrator(s) shall apply California substantive law, or federal substantive law where state law is preempted.  Civil discovery for use in such arbitration shall be conducted in accordance with the provisions of California law that would apply if the matter were being litigated in a Superior Court in the State of California.  The arbitrator(s) selected shall have the power to enforce the rights, remedies, duties, liabilities and obligations of discovery by the imposition of the same terms, conditions and penalties as can be imposed in like circumstances in a civil action by a court of competent jurisdiction of the State of California.  The provisions of California law governing discovery in a civil action filed in Superior Court of the State of California (including without limitation depositions) are incorporated herein by reference and made applicable to this Agreement.  The arbitrator(s) shall have the power to grant all legal and equitable remedies provided by California law and award compensatory damages provided by California law, except that punitive damages shall not be awarded.  The arbitrator(s) shall prepare in writing and provide to the parties an award including factual findings and the legal reasons on which the award is based. The arbitrator(s) shall not have the power to commit errors of law or legal reasoning.  Any judicial review of the arbitrator(s)’ decision shall be governed by California Code of Civil Procedure Sections 1285 et seq., except that the parties hereto expressly grant the Superior Court the authority to correct errors of law, and modify the arbitrator(s)’ ruling to avoid errors of law.  The prevailing party in any Arbitration hereunder shall be awarded reasonable attorneys’ fees, expert and non-expert witness costs and expenses incurred directly or indirectly with said Arbitration, including without limitation the fees and expenses of the arbitrator(s) and any other expenses of the Arbitration.  Notwithstanding the foregoing provisions of this Section 10.1, in the event that any party hereto wishes to obtain injunctive relief or a temporary restraining order, or provisional remedies such as a writ of attachment, such party may initiate an action for such relief in a court of general jurisdiction in the State of California. The decision of the court with respect to the requested injunctive relief or temporary restraining order or other provisional remedy shall be subject to appeal only as allowed under California law.  Such courts shall not, however, have the authority to review or grant any request or demand for damages.”

b.       The First Contract Between PIH and ECMSO

The second contract is titled “Hospital Risk Pool Administrative Services Agreement.” (Motion to Compel Arbitration, Exh. 2, p. 1.) This contract is signed by PIH on March 25, 2016 and by ECMSO on March 28, 2016. (Id. at p. 10.) Bui signed this contract on behalf of ECMSO as the President/CEO of ECMSO, but Bui did not separately sign this contract on behalf of herself. (Ibid.) This contract contains an arbitration provision that is nearly (but not exactly) identical to the arbitration provision (i.e., the second dispute resolution provision) that appears in the earlier contract. (Id. at ¶ 10.1.)

c.       The Contract Between PIH and AMG

The third contract is titled “Hospital/Network Risk Pool Agreement.” (Motion to Compel Arbitration, Exh. 1, p. 1.) This contract is signed by PIH on March 25, 2016 and AMG on March 28, 2016. (Id. at p. 4.) Notably, neither the contract nor any of its exhibits contain an arbitration provision. However, the contract does contain a provision for “Entire Agreement,” which states:

“This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained herein and supersedes all prior and contemporaneous agreements, representations and understandings of the parties. No supplement, amendment or modification of this Agreement shall be binding unless executed in writing by both of the parties.” (Id. at ¶ 4.03.)

d.       The Second Contract Between PIH and ECMSO

        The last contract is titled “Tolling Agreement.” (Supp. Mem., Supp. Exh. 1, p. 1.) This contract is signed by ECMSO on an unknown day in October 2020. (Id. at p. 3.) Bui signed this contract on behalf of ECMSO as the President and CEO of ECMSO, but Bui did not separately sign this contract on behalf of herself. (Ibid.) The version of the contract provided does not have a signature by PIH, even though a space for such a signature is provided. (Ibid.) The following are the relevant provisions of this contract.

“The Parties to this Agreement are (i) PIH Health Good Samaritan Hospital, a California not for profit hospital, formerly known as Good Samaritan Hospital (‘GSH’); and (ii) Easy Care MSO, LLC, a California limited liability company (‘MSO’).” (Supp. Mem., Supp. Exh. 1, ¶ 1.a.)

“The claims to which this Agreement applies ("Claims") consist of and include any and all rights, demands, damages, costs, losses, causes of action, expenses or other claims of any type or nature which either of the Parties may have against the other or against any of their officers, directors, members, shareholders, employees, agents, contractors or attorneys (‘Affiliates’) to the extent arising from or relating in any way to (i) the subject matter of the Action; (ii) contracts and agreements between the Parties including (a) that certain Hospital Risk Pool Administrative Services Agreement (the ‘ASA’), dated August 1, 2016, between GSH and MSO; (b) that certain Hospital-MSO Delegation Agreement (‘Delegation Agreement’), dated August 1, 2016, between GSH and MSO; and ( c) any amendments thereto or any other or related contracts or agreements between the Parties (‘Related Agreements’); and (iii) any other acts, practices, transactions or occurrences that have been in existence to any degree between the Parties as of the date of this Agreement. Without limiting the generality of the foregoing, the Claims also include any claim or demand which is or may be within the scope of the agreement between the Parties for the arbitration of claims as set forth in section 10.1 of the ASA (‘Arbitration Agreement’), the terms and provisions of which are incorporated into this Agreement by this reference.” (Supp. Mem., Supp. Exh. 1, ¶ 1.c.)

“Any claim or dispute arising from this Agreement shall likewise be subject to arbitration, upon the same terms and conditions of the Arbitration Agreement.” (Supp. Mem., Supp. Exh. 1, ¶ 4.)

“This Agreement is made without prejudice and/or amendment to any and all rights, duties and obligations that either Party has with respect to the other arising out of or in relation to the ASA, the Delegation Agreement or the Related Agreements, including without limitation rights and duties of confidentiality, payment, due performance, or termination or renewal.” (Supp. Mem., Supp. Exh. 1, ¶ 5.)

“This Agreement constitutes the complete agreement between the Parties and is intended to be binding on them and each of them upon execution hereof. There are no promises, covenants, terms or conditions that are not set forth fully in writing herein.” (Supp. Mem., Supp. Exh. 1, ¶ 8.)

e.       No Contracts Between PIH and Bui

Notably, PIH does not submit any contracts which Bui signed on behalf of herself.

2.           The Parties’ Arguments

PIH moves the Court to compel AMG, ECMSO, and Bui to arbitrate this matter, arguing under various theories (including incorporation by reference, agency, estoppel, and third-party beneficiary) that arbitration is appropriate under the contracts listed above. (Motion to Compel Arbitration, p. 14:3–25.) PIH also argues that arbitration is required under the Tolling Agreement. (Supp. Mem., p. 4:16–17.)

ECMSO does not oppose the Motion to Compel Arbitration. (ECMSO’s Statement of Non-Opposition, p. 3:6.)

Bui opposes the Motion to Compel Arbitration, arguing: (1) that Bui cannot be compelled to arbitrate because she did not sign an agreement and no duties or obligations were delegated to her; (2) that Bui cannot be compelled to arbitrate because PIH’s claims against her do not bind her to any contract; and (3) that Bui cannot be compelled to arbitrate because none of the exceptions that would bind her as a non-signatory exist in this case. (Bui’s Opposition to Motion to Compel Arbitration, pp. 7:2–3, 7:18–19, 9:1–2.)

AMG also opposes the Motion to Compel Arbitration, arguing: (1) that without an arbitration agreement, AMG cannot be compelled to arbitrate; (2) that PIH relies on case law that does not support its motion; (3) that AMG has a substantial right to litigate its claims in court; (4) that AMG’s arbitration agreement with ECMSO does not bind AMG to arbitration against PIH; and (5) that PIH and ECMSO’s arbitration agreement does not bind AMG to arbitration against PIH. (AMG’s Opposition to Motion to Compel Arbitration, pp. 1:15–16, 2:4, 3:2, 3:16–17, 4:1–2.)

Regarding Bui, PIH argues that she should be compelled to arbitrate because: (1) Bui benefited from PIH’s contracts with ECMSO; and (2) the language of the tolling agreement directly covers Bui. (Combined Reply, pp. 8:4–7, 9:4–5.)

Regarding AMG, PIH argues that it should be compelled to arbitrate because: (1) AMG directly benefited from the first agreement between PIH and ECMSO; (2) AMG had an agency relationship with ECMSO for risk pool administration, which was the object of the first agreement between PIH and ECMSO; (3) AMG was an express beneficiary of that same agreement; and (4) AMG is equitably estopped from refusing to comply with the arbitration clause in that agreement. (Combined Reply, pp. 3:16–17, 4:12, 6:17, 7:14–15.)

3.      Whether ECMSO Must be Compelled to Arbitration

ECMSO concedes that it must be compelled to arbitrate. The Court GRANTS the Motion to Compel Arbitration as to ECMSO.

4.      Whether Bui Must be Compelled to Arbitration

a.       Legal Standard for Equitable Estoppel

“Generally speaking, one must be a party to an arbitration agreement to be bound by it or invoke it. There are exceptions to the general rule that a nonsignatory to an agreement cannot be compelled to arbitrate and cannot invoke an agreement to arbitrate, without being a party to the arbitration agreement.

“One pertinent exception is based on the doctrine of equitable estoppel. Under that doctrine, as applied in both federal and California decisional authority, a nonsignatory defendant may invoke an arbitration clause to compel a signatory plaintiff to arbitrate its claims when the causes of action against the nonsignatory are ‘intimately founded in and intertwined’ with the underlying contract obligations. By relying on contract terms in a claim against a nonsignatory defendant, even if not exclusively, a plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement. The rule applies to prevent parties from trifling with their contractual obligations.

“Where the equitable estoppel doctrine applies, the nonsignatory has a right to enforce the arbitration agreement. In such cases, the nonsignatory is not a ‘third party’ within the meaning of section 1281.2(c), and that provision simply does not apply.”

(Molecular Analytical Sys. v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 706, cleaned up.)

“When a plaintiff brings a claim which relies on contract terms against a defendant, the plaintiff may be equitably estopped from repudiating the arbitration clause contained in that agreement. There is no reason why this doctrine should not be equally applicable to a nonsignatory plaintiff. When that plaintiff is suing on a contract—on the basis that, even though the plaintiff was not a party to the contract, the plaintiff is nonetheless entitled to recover for its breach, the plaintiff should be equitably estopped from repudiating the contract's arbitration clause.

“This is particularly true where, as appears to be the case here, all of the plaintiffs, signatory and nonsignatory, are related entities. A nonsignatory can be compelled to arbitrate when a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration agreement, making it equitable to compel the nonsignatory to arbitrate as well. Additionally, a nonsignatory can be compelled to arbitrate when it is suing as a third party beneficiary of the contract containing the arbitration clause; this too weighs in favor of enforcing the arbitration clause in this case.”

(JSM Tuscany, LLC v. Super. Ct. (2011) 193 Cal.App.4th 1222, 1240–1241, cleaned up.)

“There may be cases where the alleged defamation is so intimately bound with the terms of the agreement that arbitration is appropriate.” (Med. Staff of Drs. Med. Ctr. in Modesto v. Kamil (2005) 132 Cal.App.4th 679, 683; accord Vianna v. Drs’ Mgmt. Co. (1994) 27 Cal.App.4th 1186, 1189–1190.)

b.       Discussion

        In this matter, Bui as an individual (i.e., not as a representative of ECMSO) has only made one claim: defamation per se, by Bui and ECMSO against PIH and Meiselman. (ECMSO and Bui’s Cross-Complaint, p. 13:23.) The allegedly defamatory statement, which was ostensibly made by Meiselman acting individually and/or on behalf of PIH, was that Bui and ECMSO did not have authority to sign a letter of agreement on behalf of PIH. (Id. at ¶¶ 45, 47.) According to Bui and ECMSO, Bui did sign this letter of agreement on behalf of ECMSO and PIH, and Bui had the express authority to do so under the contract that ECMSO has with PIH. (Id. at ¶¶ 18–19.) The only allegation of harm to Bui because of the statement is “harm to Ms. Bui’s reputation in the close-knit managed care industry in Southern California where Ms. Bui and [ECMSO] operate exclusively.” (Id. at ¶ 50.)

        Here, ECMSO has conceded to arbitration, Bui is the President and CEO of ECMSO, Bui and ECMSO have a preexisting relationship with PIH, and Bui is a nonsignatory plaintiff that is invoking the contract between ECMSO and PIH for her sole cause of action of defamation. It is clear that the allegedly defamatory statement is so intimately bound with the terms of the agreement that arbitration is appropriate under the doctrine of equitable estoppel. Indeed, without a factual determination that Bui had the authority under the contract to sign the letter of agreement on behalf of PIH, there would be no defamation and no cause of action for Bui. Because Bui is seeking to use the contract between ECMSO and PIH — of which Bui is not a signatory — against PIH, Bui is equitably estopped from asserting that the contract’s arbitration provision does not apply to Bui.

The Court GRANTS the Motion to Compel Arbitration as to Bui.

The Court need not, and does not, reach the other arguments made regarding Bui.

5.         Whether AMG Must be Compelled to Arbitration

PIH makes multiple different arguments about why AMG must be compelled to arbitration. At their core, each of these arguments is based on the arbitration provisions that exist in the contracts between PIH and ECMSO — agreements of which AMG is not a signatory.

However, PIH and AMG do have their own contract. This contract was signed on the exact same date that PIH and ECMSO signed their contract. Notably, the PIH and AMG contract does not have an arbitration provision. However, it does contain the following provision:

“This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained herein and supersedes all prior and contemporaneous agreements, representations and understandings of the parties. No supplement, amendment or modification of this Agreement shall be binding unless executed in writing by both of the parties.” (Motion to Compel Arbitration, Exh. 1, ¶ 4.03.)

Both of the contracts deal with risk pools. All of the issues between AMG and PIH in this litigation deal with risk pools. PIH made an explicit contract that “constitutes the entire agreement” between PIH and AMG pertaining to risk pools, and that agreement “supersedes all prior and contemporaneous agreements, representations and understandings of the parties” as to the risk pools at issue. (Motion to Compel Arbitration, Exh. 1, ¶ 4.03.) It would violate PIH’s own contract to compel either PIH or AMG to arbitrate the issue of risk pools when arbitration and arbitrability are completely omitted from their contract and the contract explicitly states that it constitutes their entire agreement on risk pools.

If PIH had wished to include such an arbitration provision, it could have done so.  It did not.  PIH cannot now rely on its right to arbitrate with ECMSO to infringe on AMG’s right to redress in the courts.

Notably, the only other contract that AMG did sign, which was with ECMSO, had two dispute resolution provisions: one provision allowing disputes to be resolved by the Court, and another provision allowing arbitration. Thus, even if AMG’s contract with ECMSO was invoked, AMG could not be compelled to arbitrate based upon it because that contract expressly allows resolution by the Court.

Furthermore, the Tolling Agreement does not help PIH. First, the Tolling Agreement does not apply to AMG, as the language in that document explicitly states that it only covers the ECMSO and PIH. (Supp. Mem., Supp. Exh. 1, ¶¶ 1.a, 1.c, 4, 5.) Second, related contracts are not modified by the Tolling Agreement, as per the express terms of the Tolling Agreement. (Id. at ¶ 8.)

Given these circumstances, it would be inequitable and unjust to compel AMG to arbitrate with PIH pursuant to any of the doctrines PIH cites.

The Court DENIES the Motion to Compel Arbitration as to AMG.

C.      Conclusion

The Motion to Compel Arbitration is GRANTED in part. The Motion is GRANTED as to ECMSO and Bui. The Motion is DENIED as to AMG.  The Arbitration is stayed pending trial on the complaint.

II.       Demurrer

The Court has granted the Motion to Compel Arbitration as to ECMSO and Bui.  Bui’s Demurrer to PIH’s Cross-Complaint is TAKEN OFF CALENDAR.