Judge: Stephen P. Pfahler, Case: 21STCV39049, Date: 2023-05-10 Tentative Ruling

Case Number: 21STCV39049    Hearing Date: May 10, 2023    Dept: F49

Dept. F-49

Date: 5-10-23 (reset from Department 29)

Case #21STCV39049

ARBITRATION

MOVING PARTY: Defendant, San Fernando Sub-Acute Rehabilitation Center LLC, et al.

RESPONDING PARTY: Plaintiff, Mary Ruiz, et al.

RELIEF REQUESTED

Motion to Compel Arbitration and Stay

SUMMARY OF ACTION

Plaintiff Mary Ruiz is the mother of decedent James Debarros. Plaintiff alleges James received treatment from San Fernando Sub-Acute Rehabilitation Center LLC dba Golden Legacy Care and Dr. Suman Patel and care from March 6, 2020 through October 22, 2020, and New Horizon Home Health Care, Inc. from October 22, through November 1, 2020. Plaintiff alleges defendants provided substandard care and/or committed wrongful acts. On October 16, 2021 and September 30, 2022, Plaintiff filed a complaint and first amended complaint for Dependent Adult Abuse/Neglect, Professional Negligence, Wrongful Death, and Violation of Patient Rights. On February 28, 2023, the action was transferred from Department 29 (personal injury) to Department 49.

RULING: Denied.

Defendant San Fernando Sub-Acute Rehabilitation Center LLC dba Golden Legacy Care (Legacy Care) moves to compel arbitration pursuant to the terms of the admission Agreement and executed as part of the paperwork for the provision of care at the facility. Legacy Care seeks arbitration on grounds that the case arises from the provision of care.

Plaintiff Mary Ruiz, individually and as successor in interest to James Debarros through GAL Timothy Lynch (Ruiz) in opposition presents a myriad of challenges beginning with entry of the agreement, unconscionability, and non-signatory parties. Legacy Care in reply reiterates the arguments in support and attempts to rebut the plaintiff’s arguments.

“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 thereto refuses to arbitrate such 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 determines that: (a) The right to compel arbitration has been waived by the petitioner; or (b) Grounds exist for the revocation of the agreement.” (Code Civ. Proc., § 1281.2.)

The law creates a general presumption in favor of arbitration. In a motion to compel arbitration, the moving party must prove by a preponderance of evidence the existence of the arbitration agreement and that the dispute is covered by the agreement. The burden then shifts to the resisting party to prove by a preponderance of evidence a ground for denial (e.g., fraud, unconscionability, etc.). (Rosenthal v. Great Western Fin'l Securities Corp. (1996) 14 Cal.4th 394, 413-414; Hotels Nevada v. L.A. Pacific Ctr., Inc. (2006) 144 Cal.App.4th 754, 758.) Any challenges to the formation of the arbitration agreement should be considered before any order sending the parties to arbitration. The trier of fact weighs all evidence, including affidavits, declarations, documents, and, if applicable, oral testimony to determine whether the action goes to arbitration. (Hotels Nevada v. L.A. Pacific Ctr., Inc., supra, 144 Cal.App.4th at p. 758.)

The sections of the arbitration clause consists of a multi-section agreement with two signature execution presented in two parts in bold red type: “NOTICE: BY SIGNING THIS CONTRACT YOU ARE AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRACTICE DECIDED BY NEUTRAL ARIBTRATION AND YOU ARE GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL. SEE ARTICLE 1 OF THIS CONTRACT.”

“NOTICE: BY SIGNING THIS CONTRACT YOU ARE AGREEING TO HAVE ALL CLAIMS, INCLUDING CLAIMS OTHER THAN A CLAIM FOR MEDICAL MALPRACTICE, DECIDED BY NEUTRAL ARIBTRATION AND YOU ARE GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL AND YOU AGREE THAT NO PARTY SHALL ADJUDICATE ANY CLAIM ON A CLASS ACTION BASIS.”

Article 1, as referenced in the first signature section, states: “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.”

The court finds the existence of the agreement valid. [Declaration of Kevin Eng, Ex. A.] Plaintiff however challenges the enforceability of the agreement against Plaintiff in that while decedent indisputably executed the agreement, Plaintiff challenges whether the agreement is binding on hers and successors on the wrongful death claim. Defendant in reply maintains the agreement was freely executed, and the wrongful death claim is subject to arbitration.

Plaintiff’s argument finds support in that as a non-signatory party, there is no indication of a waiver of the right to a trial. (Fitzhugh v. Granada Healthcare & Rehabilitation Center, LLC (2007) 150 Cal.App.4th 469, 474-475.) Defendant counters that a decedent can in fact bind successors with citation to authority applying to medical malpractice claims and arbitration clauses executed pursuant to Code of Civil Procedure section 1295. (Ruiz v. Podolsky. (2010) 50 Cal.4th 838, 850-852.) At a minimum, at least one distinction between the cases apparently depends on whether the claim arises in the provision of medical care or provision of a care via a skilled nursing facility and governed under Health and Safety Code section 1430, which allows for the filing of a lawsuit. (Health & Saf. Code, § 1430, subd. (b)(1); Fitzhugh v. Granada Healthcare & Rehabilitation Center, LLC, supra, 150 Cal.App.4th at pp. 473-474; Bush v. Horizon West (2012) 205 Cal.App.4th 924, 929-931.) A later court recognized the general rule not binding the right of a decedent to bind successors from the separate wrongful death claim brought by the heirs. (Monschke v. Timber Ridge Assisted Living, LLC (2016) 244 Cal.App.4th 583, 587-588.) Nevertheless, all parties can be joined into arbitration based on common issues of fact, where conflicting rulings are possible. (Birl v. Heritage Care LLC (2009) 172 Cal.App.4th 1313, 1321.)

Legacy Care particularly emphasizes its role as a “healthcare provider,” and the death of James Debarros as the result of professional negligence rather than dependent abuse, thereby qualifying for consideration under the section 1295 standard. The operative complaint itself lacks specific facts as to the roles of the various defendants other than the periods of time decedent spent at the facilities, with care rendered by Dr. Patel at Legacy Care. [First Amend. Comp., ¶ 6.] The causes of action themselves allege one undeniable claim for professional negligence against Legacy Care, while the dependent abuse claims allege failure to provide sufficient monitoring following a home fire, though the professional negligence claim also relies on the insufficient monitoring allegations. [First Amend. Comp., ¶ 15, 20.]

Again, the court accepts the existence and plain language of the arbitration clause, including the language regarding medical malpractice claims, as well as non-medical malpractice claims. Given Dr. Patel apparently worked at the facility, the court appreciates the possibility for both types of claims to arise from the death of James Debarros. Nevertheless, other than a conclusive statement in the reply, the court finds no basis of making any determination on the scope of care provided—medical versus custodial care. (Code Civ. Proc., § 1295, subd. (g); Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 783; Delaney v. Baker (1999) 20 Cal.4th 23, 41–42.) Meanwhile the plain language of the causes of action for violation of patients’ rights categorically falls under Health and Safety Code section 14300, which as addressed above, is excluded from arbitration.

Thus, given the possibility of certain claims falling under the professional negligence language, with am equal if not greater number either categorically, if not factually excluded as well, the court cites back to the language of Code of Civil Procedure section 1281.2, subdivision (c) regarding the potential for conflicting rulings as a basis for denial of arbitration. Legacy Care anticipating this inquiry contends said section is preempted, due to the language of the arbitration agreement requiring application of Federal Arbitration Act rules, which preclude said review.

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 determines that:

…

(c) 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. …

(Code Civ. Proc., 1281.2, subd. (c).)

The operative section relied upon by Legacy Care is provided in Article 7 of the agreement: “This Agreement relates to the Resident's admission to the Facility, and the Facility, among other things, participates in the Medicare and/or Medi-Cal programs and/or procures supplies from out of state vendors. The parties, therefore, agree that the underlying admission to the Facility involves interstate commerce. Accordingly, this Agreement is to be governed by the Federal Arbitration Act and the procedural rules set forth in the Federal Arbitration Act shall govern any petition to compel arbitration.”

The Court of Appeal in the Second District considered the question of governing rules: “we conclude the parties intended to incorporate the FAA with respect to compelling arbitration. … As set forth below, previous cases have held that when an arbitration agreement provides that its ‘enforcement’ shall be governed by California law, the California Arbitration Act (CAA) governs a party's motion to compel arbitration. It follows that when an agreement provides that its ‘enforcement’ shall be governed by the FAA, the FAA governs a party's motion to compel arbitration.” (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 346; Mastick v. TD Ameritrade, Inc. (2012) 209 Cal.App.4th 1258, 1263.) The holding comes following United States Supreme Court precedent addressing conflicts with section 1281.2, subdivision (c).

“The FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration. (Citation.) But even when Congress has not completely displaced state regulation in an area, state law may nonetheless be pre-empted to the extent that it actually conflicts with federal law—that is, to the extent that it ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’ (Citation.) The question before us, therefore, is whether application of Cal.Civ.Proc.Code Ann. § 1281.2(c) to stay arbitration under this contract in interstate commerce, in accordance with the terms of the arbitration agreement itself, would undermine the goals and policies of the FAA. We conclude that it would not.

“The FAA was designed ‘to overrule the judiciary's long-standing refusal to enforce agreements to arbitrate,’ (Citation), and to place such agreements ‘“upon the same footing as other contracts,”’ (Citation.) … Accordingly, we have recognized that the FAA does not require parties to arbitrate when they have not agreed to do so, (citation) … It simply requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms.

“In recognition of Congress' principal purpose of ensuring that private arbitration agreements are enforced according to their terms, we have held that the FAA pre-empts state laws which ‘require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.’ … But it does not follow that the FAA prevents the enforcement of agreements to arbitrate under different rules than those set forth in the Act itself. Indeed, such a result would be quite inimical to the FAA's primary purpose of ensuring that private agreements to arbitrate are enforced according to their terms. Arbitration under the Act is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit. Just as they may limit by contract the issues which they will arbitrate … Where, as here, the parties have agreed to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed where the Act would otherwise permit it to go forward. By permitting the courts to ‘rigorously enforce”’ such agreements according to their terms (citation), we give effect to the contractual rights and expectations of the parties, without doing violence to the policies behind by the FAA.”

(Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 477–479; Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 385-386.)

Plaintiff maintains that any argument for FAA preemption improperly subverts California court authority to consider the fundamental basis of the contract itself. “In applying the FAA, the United States Supreme Court has made clear that ‘When deciding whether the parties agreed to arbitrate ..., courts generally ... should apply ordinary state-law principles that govern the formation of contracts. [Citations.]’” (Mitchell v. American Fair Credit Ass'n, Inc. (2002) 99 Cal.App.4th 1345, 1355; First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944 [“When deciding whether the parties agreed to arbitrate a certain matter (including arbitrability), courts generally (though with a qualification we discuss below) should apply ordinary state-law principles that govern the formation of contracts”].)

“‘Under “both federal and state law, the threshold question presented by a petition to compel arbitration is whether there is an agreement to arbitrate.”’” (Long v. Provide Commerce, Inc. (2016) 245 Cal.App.4th 855, 861.) “Private arbitration is a matter of agreement between the parties and is governed by contract law. (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313.)

“Mutual assent is required for there to be an enforceable agreement to arbitrate disputes. ‘“[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.”’ (Citations.) ‘The right to arbitration depends upon contract; a petition to compel arbitration is simply a suit in equity seeking specific performance of that contract. [Citations.] There is no public policy favoring arbitration of disputes which the parties have not agreed to arbitrate. [Citation.]’ (Citation.) [¶] In other words, mutual assent exists when a reasonable person would conclude from the outward conduct of the parties that there was mutual agreement regarding their intent to be bound. (Citation.) If such mutual intent to be bound into arbitration cannot be shown, arbitration will not be compelled. (Citation.) [¶] Regardless of how broad the terms of a contract are, the contract will only extend to those issues for which it appears that the parties intended to contract. (Citation.) The parties must agree on all material terms; otherwise, there is no meeting of the minds between the parties and thus, no contract is formed. (Citation.)”

(Burch v. Premier Homes, LLC (2011) 199 Cal.App.4th 730, 745–746.)

As addressed above, it is undisputed that Plaintiff is not a signatory party to the agreement. Hence, even assuming FAA somehow precluded the law regarding non-arbitration of claims under Health and Safety Code section 1430, and the wrongful death claims brought by the non-signatory parties, on a fundamental level, the court still finds no basis of mutual assent or a basis of authority to bind the non-signatory parties. Legacy Care cannot rely on enforcement of terms that prior California courts fundamentally found invalid as to certain claims, without a valid basis for compelling the parties to any form of arbitration in the first place. The argument puts the proverbial cart before the horse. The court otherwise finds no basis for delegation of the arbitrator to consider this question. (Nelson v. Dual Diagnosis Treatment Center, Inc. (2022) 77 Cal.App.5th 643, 655-656.)

Consistent with California contract formation authority, and bars against arbitration of certain claims, the court therefore finds Code of Civil Procedure section 1281.2, subdivision (c) precludes arbitration, due to the potential conflicts in rulings.

Plaintiff also submits argument on procedural and substantive unconscionability. Plaintiff cites broad authority but the substance of the argument appears to depend on identifying the contract as adhesive and challenging the fee sharing provision.

Unconscionability claims have both a “‘procedural’” and “‘substantive’” element. (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1531.) “‘Procedural unconscionability’” concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1329.) “‘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.’” (Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1532.) “Substantive unconscionability” involves contracts leading to “‘“overly harsh”’” or “‘“one-sided”’” results.’” … “[U]nconscionability turns … on an absence of ‘justification “for it…” [and therefore] must be evaluated as of the time the contract was made.’” (Id. at p. 1532.)

Plaintiff cites to the employment standard regarding the sharing and/or shifting of costs against the claimant. Plaintiff fails to establish applicability of the employment standard to the subject contract.

“Here the adhesive nature of the contract is sufficient to establish some degree of procedural unconscionability. Yet ‘a finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure they are not manifestly unfair or one-sided.’” (Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899, 915.) Other than a declaration of adhesion, the court finds no supported basis, but considers the costs sharing provisions in context.

“In the area of consumer arbitration, the Legislature has addressed costs in a different way. In 2002, shortly after Armendariz was decided, the Legislature enacted Code of Civil Procedure section 1284.3 to address fees and costs in consumer arbitration. Subdivision (a) of section 1284.3 provides that ‘[n]o neutral arbitrator or private arbitration company shall administer a consumer arbitration under any agreement or rule requiring that a consumer who is a party to the arbitration pay the fees and costs incurred by an opposing party if the consumer does not prevail in the arbitration, including, but not limited to, the fees and costs of the arbitrator, provider organization, attorney, or witnesses.’ Most pertinently, section 1284.3, subdivision (b)(1) provides that ‘[a]ll fees and costs charged to or assessed upon a consumer party by a private arbitration company in a consumer arbitration, exclusive of arbitrator fees, shall be waived for an indigent consumer. For the purposes of this section, “indigent consumer” means a person having a gross monthly income that is less than 300 percent of the federal poverty guidelines. Nothing in this section shall affect the ability of a private arbitration company to shift fees that would otherwise be charged or assessed upon a consumer party to a nonconsumer party.’ Subdivision (b)(2) requires the arbitration provider to give notice of the fee waiver provision, and subdivision (b)(3) provides that “[a]ny consumer requesting a waiver of fees or costs may establish his or her eligibility by making a declaration under oath on a form provided to the consumer by the private arbitration company for signature stating his or her monthly income and the number of persons living in his or her household. No private arbitration company may require a consumer to provide any further statement or evidence of indigence.” (Code Civ. Proc., § 1284.3, subd. (b)(2) & (3).)”

(Id., at pp. 918–919.)

Neither party addresses whether the subject contract constitutes one in the consumer realm, or whether the provision of healthcare creates a level of heightened scrutiny like an employment contract. The court declines to make the arguments for the parties. Regardless, given the court finds no basis for compelling arbitration, further consideration of the defense to compelling arbitration is not required either way. The court therefore declines further consideration for purposes of the subject motion.

The motion to compel arbitration is therefore denied, and the court will set a trial date.

Legacy Care to give notice to all parties.