Judge Teresa A. Beaudet, Case 22STCV11231 2022-12-07 Tentative Ruling

Plaintiff Robert J. Smyth-Medina, M.D., a.k.a. Robert J. Smyth, M.D. (“Plaintiff”)

filed this employment action against Defendants California Eye Specialists Medical Group, Inc., Payam Amini, M.D., Payam Amini, M.D., Inc., Azul Vision, Inc., and North Valley Eye Medical Group, Inc. (“NVE”) (collectively, “Defendants”) on April 1, 2022. In the Complaint, Plaintiff asserts causes of action for (1) breach of employment contract, (2) violation of Labor Code section 226, and (3) declaratory relief.

Defendants now move for an order compelling arbitration of Plaintiff’s Complaint. Defendants also seek a stay of discovery pending the Court’s decision on this motion.[1] Plaintiff opposes.

On November 3, 2022, the Court continued the hearing on the motion to December 7, 2022. On November 9, 2022, Plaintiff filed a “Supplemental Brief in Opposition to Motion to Compel Arbitration.” The supplemental brief indicates, inter alia, that “[a]t the first hearing on this matter on November 3, 2022, counsel for the moving Defendants and the Court raised several issues that had not previously been raised or briefed by either party. While the Court neither invited nor forbade the parties to submit further briefing, Plaintiff believes this short supplemental brief focused exclusively on those issues will be helpful to the Court’s further analysis.” (Suppl. Opp’n at p. 2:1-6.) On November 29, 2022, Defendants filed a reply to Plaintiff’s supplemental opposition brief. On November 30, 2022, Plaintiff filed a surreply in opposition to the motion.

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. Securities Corp. (1996) 14 Cal.4th 394, 413.)

Generally, on a petition to compel arbitration, the court must grant the petition unless it finds either (1) no written agreement to arbitrate exists; (2) the right to compel arbitration has been waived; (3) grounds exist for revocation of the agreement; or (4) litigation is pending that may render the arbitration unnecessary or create conflicting rulings on common issues. ((Code Civ. Proc., § 1281.2); (Condee v. Longwood Management Corp. (2001) 88 Cal.App.4th 215, 218-219.)

“California has a strong public policy in favor of arbitration and any doubts regarding the arbitrability of a dispute are resolved in favor of arbitration.” (Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 686.) “This strong policy has resulted in the general rule that arbitration should be upheld unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute.” (Ibid. [internal quotations omitted].) This is in accord with the liberal federal policy favoring arbitration agreements under the Federal Arbitration Act (“FAA”), which governs all agreements to arbitrate in contracts “involving interstate commerce.” (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

Defendants note that Plaintiff alleges that he entered into an “Amended and Restated Physician Employment Agreement” dated December 1, 2020 under which he agreed to continue to work for NVE as a physician and NVE’s Medical Director. (Compl., ¶ 2.) The “Amended and Restated Physician Employment Agreement” (herein, the “Agreement”) is attached as Exhibit “A” to Plaintiff’s Complaint. (Compl., ¶ 2, Ex. A.) Section 21(a) of the Agreement provides as follows:

“Mediation; Judicate West Arbitration. In the event of any controversy or claim arising out of or relating to this Agreement, or the breach thereof, with the sole exception of a claim or controversy relating to a violation of Section 12 hereof, the parties shall first attempt to resolve the dispute by non-binding mediation. A neutral mediator shall be selected within thirty (30) days of written notice from any party to the dispute. The mediation shall be conducted within sixty (60) days after selection of the mediator. If mediation is unsuccessful, such controversy or claim shall be settled by arbitration, with Judicate West as the arbitration tribunal, in accordance with Sections 1280 through 1286.4 of the California Code of Civil Procedure and the Commercial Arbitration (the “Judicate West Rules”), which may be found at https://www.judicatewest.com/Resources/ArbitrationRules. If Judicate West, Inc. adopts arbitration rules specific to employment-related claims, those arbitration rules shall apply instead of the Commercial Arbitration Rules.”

The Agreement is made by and between NVE and Plaintiff. (Compl., ¶ 2, Ex. A.) Defendants assert that while all of the Defendants are not signatories to the Agreement, the arbitration clause in the Agreement binds Plaintiff to arbitrate his claims against all Defendants because his claims against them arise out of and are based on the Agreement. Defendants cite to Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1287, where the Court of Appeal noted that “California courts, applying federal law, have embraced the estoppel theory, holding that a signatory plaintiff who sues on a written contract containing an arbitration clause may be estopped from denying arbitration if he sues nonsignatories as related or affiliated persons with the signatory entity…[T]he equitable estoppel doctrine applies when a party has signed an agreement to arbitrate but attempts to avoid arbitration by suing nonsignatory defendants for claims that are based on the same facts and are inherently inseparable from arbitrable claims against signatory defendants. Claims that rely upon, make reference to, or are intertwined with claims under the subject contract are arbitrable.” (Internal quotations and citations omitted.)

In the opposition, Plaintiff does not dispute that he entered into the Agreement. (See Opp’n at p. 1:7-10, “[a]s part of that sale of his practice, Dr. Smyth entered into an ‘Amended and Restated Physician Employment Agreement’…dated December 1, 2020 with Defendant North Valley Eye Medical Group, Inc. (‘NVE’).”)

However, Plaintiff asserts that by refusing to mediate, Defendants breached a condition precedent to arbitration, such that the duty to arbitrate never arose under the Agreement. Plaintiff notes that “[u]nder the law of contracts, parties may expressly agree that a right or duty is conditional upon the occurrence or nonoccurrence of an act or event. Thus, a condition precedent is either an act of a party that must be performed or an uncertain event that must happen before the contractual right accrues or the contractual duty arises.” (Platt Pacific, Inc. v. Andelson (1993) 6 Cal.4th 307, 313 [internal citations omitted].) As set forth above, Section 21(a) of the Agreement provides, inter alia, that “[i]n the event of any controversy or claim arising out of or relating to this Agreement, or the breach thereof…the parties shall first attempt to resolve the dispute by non-binding mediation. A neutral mediator shall be selected within thirty (30) days of written notice from any party to the dispute. The mediation shall be conducted within sixty (60) days after selection of the mediator. If mediation is unsuccessful, such controversy or claim shall be settled by arbitration…” (Emphasis added.)

Plaintiff provides evidence that on December 23, 2021, his counsel demanded mediation of the parties’ dispute. (Dempsey Decl., ¶ 10, Ex. 13.) On December 29, 2021, Plaintiff’s counsel received correspondence from counsel for Dr. Payam Amini and California Eye Specialists Medical Group, Inc. (Mr. Kim), which indicated, inter alia, that “…Cal Eye requests that the demand for mediation be postponed.” (Dempsey Decl., ¶¶ 3, 10, Ex. 16.) On January 6, 2022, Plaintiff’s counsel sent Mr. Kim a list of several proposed mediators. (Dempsey Decl., ¶ 10, Ex. 17.) Plaintiff’s counsel indicates that he followed up on this request, but after three months of unsuccessful settlement discussions, Plaintiff filed the instant action on April 1, 2022. (Dempsey Decl., ¶ 10.) Thereafter, on April 28, 2022, Defendants’ counsel sent an email to Plaintiff’s counsel indicating, inter alia, “[p]lease advise whether your office will stipulate to submit the action to mediation and arbitration as required in the Amended and Restated Physician Employment Agreement.” (Dempsey Decl., ¶ 10, Ex. 20.) On April 29, 2022, Plaintiff’s counsel responded and asserted that Plaintiff requested mediation and arbitration at the beginning of the dispute, but that Defendants waived it. (Dempsey Decl., ¶ 10, Ex. 21.)

Plaintiff asserts that due to these circumstances, arbitration cannot be compelled because Defendants breached the Agreement’s condition precedent pertaining to mediation. The Court agrees. As set forth above, the Agreement provides that “[a] neutral mediator shall be selected within thirty (30) days of written notice from any party to the dispute.” (Emphasis added.) This requirement is thus mandatory. As set forth above, although Plaintiff sent Defendants a demand for mediation on December 23, 2021 and proposed a list of mediators on January 6, 2022, Defendants did not agree to mediate the dispute until April 28, 2022, well over 30 days after Plaintiff’s December 23, 2021 demand. Per the agreement, “[t]he mediation shall be conducted within sixty (60) days after selection of the mediator. If mediation is unsuccessful, such controversy or claim shall be settled by arbitration…”

In the motion, Defendants assert that they have not waived the right to compel arbitration because they did not execute a written waiver of the Agreement’s arbitration provision.[3] Defendants note that Section 15 of the Agreement provides, “Amendments. No amendment, modification, supplement or waiver of the terms of this Agreement shall be valid unless made in writing and signed by Physician and a duly authorized representative of Employer.” (Smyth-Medina Decl., ¶ 2; Compl., ¶ 2, Ex. A.) Defendants indicate that they have not executed a writing waiving the arbitration provision set forth in Section 21 of the Agreement. (Perez Decl., ¶ 15.) Plaintiff counters that [b]ecause Defendants breached the first-sep [sic] condition precedent to arbitration in their two-step ADR provision, no contractual duty to arbitrate ever arose in the first place. That conclusion does not require any findings of ‘waiver’ on the part of Defendants…” (Opp’n at p. 5:10-14.)

Plaintiff also notes that “[h]e who seeks to enforce a contract must show that he has complied with the conditions and agreements of the contract on his part to be performed.”
(Pry Corp. of America v. Leach (1960) 177 Cal.App.2d 632, 639.) “A condition precedent is one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed. Before any party to an obligation can require another party to perform an act under it, he must fulfill all conditions precedent thereto imposed on himself.” (Id. at pp. 639-640 [internal citation omitted].) Plaintiff asserts that Defendants breached the Agreement by refusing to engage in mediation, such that they cannot now compel arbitration. Defendants do not directly address this point in the opposition.

In his supplemental opposition, Plaintiff indicates that “the Court noted that the parties continued to discuss a potential settlement even after the contractual thirty-day limitation to select a mediator had lapsed with no response from Defendants to Plaintiff’s list of potential mediators.” (Suppl. Opp’n at p. 2:7-10.) Plaintiff asserts that any such settlement discussions are incapable of satisfying a mediation condition precedent, because negotiations are not mediation. Plaintiff cites to Frei v. Davey (2004) 124 Cal.App.4th 1506, 1508, where “[i]n accordance with the parties’ express agreement, [the Court of Appeal] [held] that the prevailing parties are barred from recovering attorney fees because they refused a request to mediate.” In Frei, the “[t]he Daveys…argued they substantially complied with the mediation provision by making ‘a concerted and good faith attempt to settle the case,’ which, they say, is all mediation would have accomplished.” (Id. at p. 1514.) The Court of Appeal found that “[c]ommunications between the parties or their counsel regarding settlement are not the same as mediation. In mediation, a neutral third party analyzes the strengths and weaknesses of each party’s case, works through the economics of litigation with the parties, and otherwise assists in attempting to reach a compromise resolution of the dispute.” (Ibid.) Defendants assert that Frei is distinguishable because it involved a real estate contract, and because the instant motion does not involve prevailing party attorney’s fees. But the Court does not see how this impacts the Court’s finding in Frei that “[c]ommunications between the parties or their counsel regarding settlement are not the same as mediation.” (Frei v. Davey, supra, 124 Cal.App.4th at p. 1514.)

Next, Plaintiff indicates in his supplemental opposition that “the Court questioned whether Plaintiff’s exclusive remedy for Defendant’s breach of the mediation condition should be to require that Plaintiff file a petition seeking a court order compelling mediation.” (Suppl. Opp’n at p. 3:7-10.) Plaintiff asserts that such a requirement is not in the Agreement and that it would be unreasonable to imply a requirement forcing a plaintiff to initiate a lawsuit to obtain compliance with a mediation condition precedent. Plaintiff cites to Lange v. Schilling (2008) 163 Cal.App.4th 1412, 1417, where the Court of Appeal noted that “[t]he public policy of promoting mediation as a preferable alternative to judicial proceedings is served by requiring the party commencing litigation to seek mediation as a condition precedent to the recovery of attorney fees. … [h]ad the parties resorted to mediation, their dispute may have been resolved in a much less expensive and time-consuming manner.” (Internal quotations omitted.)

Lastly, Plaintiff indicates that “the Court raised the question of what the result would have been assuming arguendo that Defendants had complied with Plaintiff’s demand for mediation, but for some reason outside of the parties’ control, the mediation could not have taken place before the contractual deadline…” (Suppl. Opp’n at p. 4:9-13., emphasis in original.) Plaintiff asserts that assuming arguendo that the parties had contractually agreed on a specific ADR provider to conduct the mediation (though they did not), and the specific organization could not conduct a mediation before the contractual deadline had lapsed, that impossibility would excuse performance of the condition precedent within the contractual time frame. (Citing to Jones v. United States (1877) 96 U.S. 24, 29, “[i]mpossible conditions cannot be performed; and if a person contracts to do what at the time is absolutely impossible, the contract will not bind him, because no man can be obliged to perform an impossibility…”) Plaintiff also states that Defendants never claimed it was impossible to mediate. This is not disputed by Defendants in their reply to Plaintiff’s supplemental opposition.

For the foregoing reasons, Defendants’ motion to compel arbitration is denied.

[1]The Court notes that this request for a stay is not further discussed in the motion.

[2]In connection with his opposition to the instant motion, Plaintiff acknowledges that a copy of the Agreement is attached to the Complaint as Exhibit “A.” (Smyth-Medina Decl., ¶ 2.)

[3]Defendants repeat this assertion in their reply to Plaintiff’s supplemental opposition.

ROBERT J. SMYTH-MEDINA, M.D., a.k.a. ROBERT J. SMYTH, M.D, Plaintiff, vs. CALIFORNIA EYE SPECIALISTS MEDICAL GROUP, INC., et al., Defendants.	Case No.:	22STCV11231
	Hearing Date:	December 7, 2022
	Hearing Time:	10:00 a.m.
	[TENTATIVE] ORDER RE: DEFENDANTS’ MOTION TO COMPEL ARBITRATION OF PLAINTIFF’S COMPLAINT

Superior Court of California

County of Los Angeles

Department 50