Judge: Salvatore Sirna, Case: 23PSCV01579, Date: 2023-08-31 Tentative Ruling

Case Number: 23PSCV01579    Hearing Date: March 28, 2024    Dept: G

Defendants Pomona Healthcare & Wellness Center, LLC and Pomona Nursing & Healthcare Centre, LLC’s Motion to Compel Arbitration and Stay Proceedings

Respondent: Plaintiffs Rochelle Wells and Rebecca D. Donahoo

TENTATIVE RULING

Defendants Pomona Healthcare & Wellness Center, LLC and Pomona Nursing & Healthcare Centre, LLC’s Motion to Compel Arbitration and Stay Proceedings is DENIED IN PART as to Defendant Pomona Nursing & Healthcare Centre, LLC and Plaintiff Rebecca D. Donahoo’s Claims against Defendants Pomona Healthcare & Wellness Center, LLC.

Furthermore, Defendant Pomona Healthcare & Wellness Center, LLC’s Motion to Compel Arbitration and Stay Proceedings is GRANTED IN PART as to Plaintiff Rochelle Wells’s Claims against Defendant Pomona Healthcare & Wellness Center, LLC

BACKGROUND

This is a wrongful death action. From April 2019 to December 2022, Robin Marie Wells was chronically ill and under the care of multiple healthcare institutions including Defendants Pomona Healthcare & Wellness Center, LLC (PHWC), Pomona Nursing & Healthcare Centre, LLC (PNHC), and Pomona Valley Hospital Medical Center (PVHMC). On December 20, 2022, Robin Wells died while under the care of PHWC.

On May 25, 2023, Rochelle Wells and Rebecca D. Donahoo, individually and on the behalf of Robin Wells’s estate, filed a complaint against PHWC, PNHC, PVHMC, the County of Los Angeles (the County), and Does 1-200, alleging the following causes of action: (1) negligence, (2) dependent adult abuse, (3) willful misconduct, (4) wrongful death, and (5) survival. On August 31, the court overruled a demurrer to the Complaint by PVHMC.

On March 4, 2024, PHWC and PNHC filed the present motion. A hearing on the present motion is set for March 28 along with a case management conference/status conference re: ADR.

ANALYSIS

PHWC and PNHC move to compel Rochelle Wells and Donahoo to arbitration pursuant to an arbitration agreement. For the following reasons, the court GRANTS the motion in part as to Rochelle Wells’s claims against PHWC, and DENIES the motion in part as to PNHC and as to Donahoo’s claims against PHWC.

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.) The court must grant a petition to compel arbitration unless it finds no written agreement to arbitrate exists, the right to compel arbitration has been waived, grounds exist for revocation of the agreement, or litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues.  (Code Civ. Proc., § 1281.2.) A petition to compel arbitration functions as a motion. (Code Civ. Proc., § 1290.2.)

In a motion or petition to compel arbitration, “the moving party bears the burden of producing ‘prima facie evidence of a written agreement to arbitrate the controversy.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa).) Once the court finds an arbitration agreement exists, the party opposing arbitration bears the burden of establishing a defense to enforcement by preponderance of the evidence. (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413.) In interpreting an arbitration agreement, courts apply the same principles used to interpret contractual provisions with the fundamental goal of giving effect to the parties’ mutual intentions and applying contractual language if clear and explicit. (Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177.) Because public policy strongly favors arbitration, “any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.)

The Federal Arbitration Act (FAA)applies to contracts that involve interstate commerce (9 U.S.C. §§ 1, 2), but since arbitration is a matter of contract, the FAA also applies if stated in the agreement.  (See Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355.) Pursuant to the FAA, the court’s role “is limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” (Philadelphia Indemnity Ins. Co. v. SMG Holdings, Inc. (2019) 44 Cal.App.5th 834, 840, quoting U.S. ex rel. Welch v. My Left Foot Children’s Therapy, LLC (9th Cir. 2017) 871 F.3d 791, 796.)

Discussion

In this case, PHWC and PNHC argue the present action is subject to an arbitration agreement that was executed on November 25, 2020, by Rochelle Wells. (Lora Decl., Ex. A.) The arbitration agreement states it is between PHWC and Rochelle Wells as the agent or legal representative for Robin Wells. (Lora Decl., Ex. A, p. 1.) In opposition, Rochelle Wells and Donahoo argue PHWC failed to establish how Rochelle Wells had the legal authority to bind Robin Wells and Robin Wells’s estate to the arbitration agreement.

“When a defendant contends an agreement to arbitrate is binding because it was signed by an agent of the plaintiff, the defendant bears the burden of proving the signatory was the plaintiff's actual or ostensible agent.” (Kinder v. Capistrano Beach Care Center, LLC (2023) 91 Cal.App.5th 804, 812 (Kinder).) Actual agency occurs “when the agent is really employed by the principal” (Civ. Code, § 2299) while ostensible agency occurs “when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him.” (Civ. Code, § 2300.) In other words, ostensible agency requires the following: “(1) conduct by the [principal] that would cause a reasonable person to believe that the [alleged agent] was an agent of the [principal], and (2) reliance on that apparent agency relationship by the plaintiff.” (Mejia v. Community Hospital of San Bernardino (2002) 99 Cal.App.4th 1448, 1453.)

Here, the sole evidence proffered by PHWC in support of their claim that Rochelle Wells had authority to make decisions on behalf of Robin Wells is a provision in the arbitration agreement that state as follows:

“By virtue of Resident’s consent, instruction and/or durable power of attorney, I hereby certify that I am authorized to act as Resident’s agent in executing and delivering of this Arbitration Agreement. I acknowledge that the Facility is relying on this representation. I also acknowledge that pursuant to the terms of this Agreement, any claims that I may assert in my personal capacity that arise out of or relate to the provision of or failure to provide any services (medical or otherwise) or goods by the Facility to the Resident or the admission agreement are governed by this Arbitration Agreement.” (Lora Decl., Ex. A, p. 5.)

But “[a] person cannot become the agent of another merely by representing herself as such.” (Pagarigan v. Libby Care Center, Inc. (2002) 99 Cal.App.4th 298, 301 (Pagarigan).) In similar circumstances, multiple courts have rejected PHWC’s argument that the inclusion of such a provision in the arbitration agreement signed by the purported agent is sufficient to create actual or ostensible agency. (Kinder, supra, 91 Cal.App.5th at p. 813 [collecting cases]; see also Goldman v. Sunbridge Healthcare, LLC (2013) 220 Cal.App.4th 1160, 1176.) Here, PHWC failed to provide any evidence establishing how Robin Wells explicitly or implicitly authorized Rochelle Wells to serve as Robin Wells’s agent.

In reply, PHWC argues Rochelle Wells should be equitably estopped from asserting a lack of authority on the grounds of unclean hands. “A proceeding to compel arbitration is in essence a suit in equity to compel specific performance of a contract.” (Freeman v. State Farm Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 479.) The doctrine of unclean hands is an equitable remedy that allows the court to deny relief “to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief.” (Farahani v. San Diego Community College Dist. (2009) 175 Cal.App.4th 1486, 1495, quoting Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, 638.) It “does not require the party seeking relief to be guilty of fraud; it is sufficient if he merely acted unconscientiously.” (Derosa v. Transamerica Title Ins. Co. (1989) 213 Cal.App.3d 1390, 1396.)

Here, Rochelle Wells signed the provision quoted above that states Rochelle Wells had authority to sign the agreement as Robin Wells’s legal representative. Thus, Rochelle Wells is now trapped between a rock and a hard place. If Rochelle Wells did have authority from Robin Wells to sign the arbitration agreement, Rochelle Wells and Donahoo would then not be able to oppose the enforceability of the arbitration agreement on this ground. If Rochelle Wells did not have authority to sign the arbitration agreement, Rochelle Wells’s assertion to the contrary would then be deemed a false statement which triggers the application of the unclean hands doctrine.

Accordingly, the court finds PHWC failed to demonstrate the arbitration agreement at issue was binding on Donahoo as PHWC failed to establish Rochelle Wells was Robin Wells agent. Thus, the motion to compel arbitration is DENIED as to Donahoo. But because Rochelle Wells signed the agreement as Robin Wells’s purported agent, the court finds Rochelle Wells is estopped from defeating PHWC’s motion to compel by now claiming Rochelle Wells lacked such authority.

The agreement states parties agree to arbitrate claims for medical malpractice and any other disputes or claims that “relate or arise out of the provision of services or health care or any failure to provide services or health care by [PHWC].” (Lora Decl., Ex. A, § 1.1, 1.2.) The agreement also states it evidences “a transaction in interstate commerce governed by the [FAA].” (Lora Decl., Ex. A, p. 1.) Last, the agreement states it binds the parties and includes “the heirs, representatives, executors, administrators, successors, and assigns of such parties whose claims may arise out of or relate to any services (medical or otherwise) or goods provided by [PHWC] or the admission agreement.” (Lora Decl., Ex. A, § 2.2.)

Thus, with regards to Rochelle Wells’s claims, PHWC adequately established the existence of an applicable arbitration agreement that is governed by the FAA. But, on the other hand, PNHC failed to establish an applicable arbitration agreement governed by the FFA. While the arbitration agreement references PHWC, it makes no reference to PNHC as a party to the arbitration agreement. Furthermore, PHWC and PNHC’s motion to compel arbitration failed to address why the arbitration agreement is applicable to PNHC. While PNHC may very well have grounds to compel arbitration, the present motion failed to identify and establish those grounds.  Accordingly, the motion to compel arbitration is DENIED as to PNHC.

With regards to PHWC, the burden now shifts onto Rochelle Wells to establish any defenses to the enforcement of the arbitration agreement between them. In opposition, Rochelle Wells argues the arbitration agreement cannot be enforced due to (1) waiver, (2) unconscionability, and (3) possibility of inconsistent rulings on issues of facts of law. Rochelle Wells also argues the FAA is inapplicable to the arbitration agreement because the present agreement does not involve disputes in interstate commerce. This argument is foreclosed since the arbitration agreement expressly states the parties agree that the arbitration agreement involves interstate commerce and is governed by the FAA. (Lora Decl., Ex. A, p. 1.)

Last, Rochelle Wells claims the causes of action for wrongful death or willful misconduct are not subject to the arbitration agreement. This argument, however, ignores the fact that the arbitration agreement specifically states it applies to any claims “that relate or arise out of the provision of services or health care or any failure to provide services or health care.” (Lora Decl., Ex. A, § 1.1.) Because Rochelle Wells’ allegations of willful misconduct and wrongful death are aimed at PHWC’s actions taken in providing or failing to provide care for Robin Wells while in PHWC’s care, the arbitration agreement is applicable. (Complaint, ¶ 264-266, 278.)

The court addresses the remaining points below.

Waiver

While a petition to compel arbitration may be denied on grounds of waiver, waiver is not lightly inferred due to the strong policy favoring arbitration and “the party seeking to establish a waiver bears a heavy burden of proof.” (St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195.) In determining whether waiver has occurred, courts consider “(1) whether the party’s actions are inconsistent with the right to arbitrate; (2) whether the litigation machinery has been substantially invoked and the parties were well into preparation of a lawsuit’ before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) whether important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place; and (6) whether the delay affected, misled, or prejudiced the opposing party.” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 964 (Davis), quoting Peterson v. Shearson/American Express, Inc. (10th Cir. 1988) 849 F.2d 464, 467-468.) But in light of the U.S. Supreme Court’s decision in Morgan v. Sundance, Inc. (2022) 142 S.Ct. 1708 (Morgan), courts no longer consider the sixth factor looking at prejudice. (Davis, supra, 84 Cal.App.5th at p. 966.)

In this case, Rochelle Wells contends PHWC waived its right to compel arbitration by unreasonably delaying and taking actions inconsistent with an intent to arbitrate. In contending PHWC unreasonably delayed, Rochelle Wells points to the fact that PHWC did not seek to compel arbitration until eight months after they filed their answer on July 26, 2023. But the court notes this period is only seven months and seven days. In contending this time period was unreasonable, Rochelle Wells cites to Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980 (Sobremonte) and S & H Contractors, Inc. v. A.J. Taft Coal Co., Inc. (11th Cir. 1990) 906 F.2d 1507 (S & H Contractors).

In Sobremonte, the court held a defendant “failed to timely and properly assert its arbitration right” when it waited ten months to compel arbitration after service of the complaint and six weeks prior to trial. (Sobremonte, supra, 61 Cal.App.4th at p. 992-993.) While the defendant in Sobremonte asserted the existence of an arbitration agreement in its answer, the court held “mere assertion of this affirmative defense, without more, does not preclude a finding that subsequent conduct may cause a waiver of that right.” (Id., at p. 993.) In S & H Contractors, the court held an eight-month delay in demanding arbitration after the initial filing of a complaint constituted a prejudicial delay. (S & H Contractors, supra, 906 F.2d at p. 1514.) But the reliance on prejudice in S & H Contractors has since been rejected by the U.S. Supreme Court in Morgan. (See Morgan, supra, 142 S.Ct. at p. 416 & fn. 1.) Nonetheless, the delay of eight or ten months noted in Sobremonte and S & H Contractors itself was not conclusive evidence of waiver as the courts also considered whether the moving party acted in a manner inconsistent with the intent to arbitrate. (Sobremonte, supra, 61 Cal.App.4th at p. 993-994; S & H Contractors, supra, 906 F.2d at p. 1514.)

Here, Rochelle Wells appears to base the waiver argument on PHWC’s lack of action rather than an affirmative act. While Rochelle Wells claims PHWC “pursued litigation with the result of obtaining verified pleadings from Plaintiffs that reveal their legal theories,” Rochelle Wells fails to point to the existence of any motions or discovery that was filed or propounded by PHWC. Moreover, PHWC’s own actions appear consistent with preserving their right to arbitrate. After raising the existence of an arbitration provision as a defense in their answer, PHWC filed a case management statement on October 10, 2023, that requested a jury trial, outlined planned discovery requests, and failed to request binding private arbitration. On December 21, PHWC’s counsel states counsel first discovered the existence of an arbitration agreement. (Tabibkhoei Suppl. Decl., ¶ 3.) On January 8, 2024, PHWC’s counsel then informed Rochelle Wells’s counsel of the arbitration agreement and requested a stipulation to proceed with arbitration. (Tabibkhoei Decl., ¶ 4, Ex. 2.) On February 23, PHWC filed a case management statement that noted the applicability of binding private arbitration and on March 4, PHWC filed the present motion.

Based on these facts, the court does not find PHWC waived its right to compel arbitration. While PHWC could have immediately sought to compel arbitration in January 2024 after Rochelle Wells declined the proposed stipulation, the court does not find a delay by an additional month to be unreasonable. Furthermore, PHWC’s participation in the litigation so far appears to be passive and not indicative of a party that is attempting to “game the system” by benefiting from litigation procedures before reversing course to request arbitration.

Unconscionability

Pursuant to 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” including “fraud, duress, and unconscionability.” (Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239.) “‘[U]nconscionability has both a procedural and a substantive element,’ the former focusing on ‘oppression’ or ‘surprise’ due to unequal bargaining power, the latter on ‘overly harsh’ or ‘one-sided’ results.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, quoting A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 486-487.) While both elements must be present to prevent enforcement, courts evaluate them as a sliding scale in that “the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid.)

In this case, Rochelle Wells maintains the arbitration agreement is procedurally unconscionable because it was not signed at or near the time of admission. (Opp., p. 17:19-18:4.) Rochelle Wells failed, however, to identify a specific provision of the arbitration agreement that is substantively unconscionable. Because unconscionability requires a showing of both types of unconscionability, the court finds Rochelle Wells failed to demonstrate the arbitration agreement is unconscionable.

Possibility of Conflicting Rulings

Pursuant to Code of Civil Procedure section 1281.2, subdivision (c), the court must deny a petition to compel arbitration if the following applies:

“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. For purposes of this section, a pending court action or special proceeding includes an action or proceeding initiated by the party refusing to arbitrate after the petition to compel arbitration has been filed, but on or before the date of the hearing on the petition. This subdivision shall not be applicable to an agreement to arbitrate disputes as to the professional negligence of a health care provider made pursuant to Section 1295.” (Code Civ. Proc., § 1281.2, subd. (c).)

But “[w]hen the FAA applies, it preempts any contrary state law and is binding on state as well as federal courts.” (Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.App.4th 1258, 1263.) The FAA “does not authorize courts to stay arbitration pending resolution of litigation, or to refuse to enforce a valid arbitration provision to avoid duplicative proceedings or conflicting rulings.” (Ibid.)

Here, as noted above, the arbitration agreement at issue states it involves interstate commerce and is governed by the FAA. (Lora Decl., Ex. A, p. 1.) Thus, the exception in Code of Civil Procedure section 1281.2, subdivision (c) is inapplicable here as it is not appropriate grounds for refusing to enforce an arbitration agreement pursuant to the FAA.

Accordingly, the court finds PHWC established the applicability of a binding arbitration agreement and Rochelle Wells failed to establish an applicable defense to the enforcement of that agreement.  Therefore, PHWC’s motion is GRANTED as to Rochelle Wells.

CONCLUSION

Based on the foregoing, the motion is GRANTED IN PART as to Rochelle Wells’s claims against PHWC.  PHWC and PNHC’s motion to compel arbitration is DENIED IN PART as to claims against PNHC and claims against PHWC by Donahoo.