Judge Yolanda Orozco, Case 22STCV26312 2023-01-04 Tentative Ruling

Judge: Yolanda Orozco, Case: 22STCV26312, Date: 2023-01-04 Tentative Ruling

Case Number: 22STCV26312 Hearing Date: January 4, 2023 Dept: 31

MOTION TO COMPEL ARBITRATION AND STAY PROCEEDINGS

tentative ruling

Defendants’ Motion to Compel Arbitration is DENIED WITHOUT PREJUDICE.

Background

On August 15, 2022, Plaintiff Arthur Safarian, a deceased elder, by and through his Successor-In-Interest, Marina Safarian filed a Complaint against College Vista, LLC; Sun Mar Management Services, Inc., and Sun-Mar Healthcare, Inc. (collectively “Defendants”); and Does 1 to 250. The Complaint alleges causes of action for:

1) Elder Abuse/Neglect (Non-COVID Related);

2) Negligence (Non-COVID Related);

3) Elder Abuse/Financial; and

4) Violation of the Patient’s Bill of Rights.

On November 01, 2022, Defendants filed a Motion to Compel Arbitration and Stay Proceedings.

Plaintiff filed two opposing papers on December 15, 2022.

Two replies were filed on December 28, 2022.

Legal Standard

Parties may be compelled to arbitrate a dispute upon the court finding that: (1) there was a valid agreement to arbitrate between the parties; and (2) said agreement covers the controversy or controversies in the parties’ dispute.¿ (CCP § 1281.2; see also Omar v. Ralphs Grocery Co. (2004)¿118 Cal.App.4th 955, 961.)¿¿

A party petitioning to compel arbitration has the burden of establishing the existence of a valid agreement to arbitrate and the party opposing the petition has the burden of proving, by a preponderance of the evidence, any fact necessary to its defense. (Banner Entertainment, Inc. v. Superior Court¿(1998) 62 Cal.App.4th 348, 356-57.)¿¿

“If a court of competent jurisdiction . . . has ordered arbitration of a controversy which is an issue involved in an action or proceeding pending before a court of this State, the court in which such action or proceeding is pending shall, upon motion of a party to such action or proceeding, stay the action or proceeding until an arbitration is had in accordance with the order to arbitrate or until such earlier time as the court specifies.” (Code Civ. Proc., § 1281.4.)

Evidentiary Objections

Plaintiff’s objections to the Declaration of Annie To filed in Support of this Motion.

Objections Nos. 1 to 3 are SUSTAINED.

Plaintiff is correct in that Ms. To’s declaration was signed about a month after the alleged arbitration agreement was signed and does not satisfy the Business Records Exception to hearsay. The declaration does not appear to have been made during the regular course of business and was not made at or near the time the arbitration agreement was signed. Moreover, the fill-in-the-blank nature of the declaration makes it unclear to whom Ms. To explained the arbitration agreement to and if it was to Ms. Safarian or Plaintiff, or how Ms. To determined that Plaintiff was unable to sign the arbitration agreement himself, or how Plaintiff instructed Ms. To that Plaintiff authorized Ms. Safarian to sign the arbitration agreement on his behalf.

Plaintiff also objects to the Declaration of Duane Esquer filed in Support of this Motion.

Objections Nos. 1 to 10 are SUSTAINED. Declarant fails to state how long he has been Administrator for College Defendant College Vista Post Acute and how he has personal knowledge about Plaintiff’s medical records referenced in the Declaration.

Discussion

Delegation Clause

For the first time, in their reply papers, Defendant College Vista raised the argument that under the Delegation Clause, the Court lacks authority to consider any defenses to the Agreement. “Points raised for the first time in a reply brief will not be considered.” (Malmstrom v. Kaiser Aluminum & Chemical Corp. (1986) 187 Cal.App.3d 299, 320; see also Balboa Ins. Co. v. Aguirre (1983) 149 Cal. App. 3d 1002, 1010 [“The salutary rule is that points raised in a reply brief for the first time will not be considered unless good cause is shown for the failure to present them before”].)

In Mendoza v. Trans Valley Transport (2022), the appeal court found that because the defendants raised the issue regarding the delegation cause in their reply papers they had deprived the plaintiff of the opportunity to brief the issue or present evidence attacking the delegation clause, and that the defendants had waived the issue. (Mendoza v. Trans Valley Transport (2022) 75 Cal.App.5th 748, 769.)

“In summary, we conclude that Employers forfeited any right to have the arbitrator decide whether the parties have entered into a contract to arbitrate Mendoza's underlying claims by failing to properly preserve those claims in the trial court. They also waived that right by fully litigating the question there and here.”

(Id. at 771.)

The Appeal Court in Mendoza also stated: “Even if we were to consider Employers' delegation clause argument on the merits, we would hold that it was for a court to decide the threshold question whether the parties had entered into an agreement to arbitrate.” (Mendoza, supra,

75 Cal.App.5th at 772.)

The Mendoza court explained that because the threshold issue was whether there was an agreement to arbitrate that must first be decided, it made no sense to compel parties to arbitrate the issues they did not first agree to arbitrate. (Id. at 765 citing Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 254. [“‘One such logical condition precedent is whether, in fact, the parties agreed to arbitrate at all; it makes no sense to compel parties to go before an arbitrator without first determining they agreed to do so.’”]

This reasoning is consistent with United States Supreme Court precedent:

“Applying this principle, our precedents hold that courts should order arbitration of a dispute only where the court is satisfied that neither the formation of the parties' arbitration agreement nor (absent a valid provision specifically committing such disputes to an arbitrator) its enforceability or applicability to the dispute is in issue. Where a party contests either or both matters, ‘the court’ must resolve the disagreement.”

Granite Rock Co. v. International Broth. of Teamsters (2010) 561 U.S. 287, 299–300 [italics original]; see also Ahlstrom v. DHI Mortgage Company, Ltd., L.P. (9th Cir. 2021) 21 F.4th 631, 635 [“As the Supreme Court has recognized, a court should order arbitration only if it is convinced an agreement has been formed.”].)

Accordingly, this Court, rather than the arbitrator, may properly consider if the arbitration agreement was validly formed.

Existence of a Valid Arbitration Agreement

Defendants College Vista, LLC; Sun Mar Management Services, Inc., and Sun-Mar Healthcare, Inc. move for an Order to Compel Arbitration and Stay Discovery against Plaintiff on the basis that a valid and binding arbitration agreement (“Agreement”) exists between the parties. (Esquer Decl. ¶ 2, Ex. A.)

Defendants assert that on September 11, 2020, Marina Safarian, as the Legal Representative of her father (“Plaintiff”), signed the Agreement on behalf of Plaintiff. (Esquer. ¶ 2, Ex. A.) The parties to the Agreement appear to only be “College Vista” referred to as (“Facility”). (Id.) Defendants do not dispute that the term “Facility” is not defined in the Agreement. Section 1.8 of the Agreement also specifies that Federal Arbitration Act governs the Agreement. (Id.) “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.)

Plaintiff objects to the Agreement on the basis that it has not been properly authenticated. To establish a valid agreement to arbitrate disputes, “[t]he petitioner bears the burden of proving the existence of a valid arbitration agreement by [a] preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense.” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 97

Defendants submit a fill-in-the-blank type Declaration of Annie To, the Admissions Coordinator at College Vista. (Esquer Decl. ¶ 2, Ex. A.) The declaration was signed on or about October 6, 2020, about a month after the September 11, 2022, Agreement was signed. The Court determined that the Declaration was inadmissible and lacked clarity as to whom the Agreement was explained. Ms. To’s declaration also lacks facts to show how Ms. To knew that Plaintiff could not sign the agreement himself and how Plaintiff authorized Ms. Safarian to sign the Agreement on his behalf. (Id.) Nor does Ms. To’s declaration explain how Plaintiff instructed Ms. To to have Ms. Safarian review the Agreement and authorized Ms. Safarian to sign on his behalf. The approximate time of when the declaration was signed is also left blank. (Id.)

Plaintiff’s successor-in-interest, Ms. Safarian does not dispute that she signed the Agreement. However, she asserts that the Agreement was never explained to her or her father. Ms. Safarian stated that after her father was admitted to College Vista, she was met outside the entrance of College Vista by “a woman who said there were a number of papers for me to sign related to my father’s admission.” (Safarian Decl. ¶ 3.)

Ms. Safarian asserts that she was presented with a stack of papers with places marked where to sign and since they were outside, she propped her foot on a stone, and placed the papers on her knee since there was no clear surface to place the papers. (Safarian Decl. ¶ 3.) Ms. Safarian asserts that she was given no explanation about the papers other than that they were necessary for Plaintiff’s admission. (Id.) Ms. Safarian signed the papers as instructed, believing the representation that all papers related to Plaintiff’s admission. (Id.) Despite her signing the papers as requested, Ms. Safarian was unaware that admission paperwork included an arbitration agreement and that no one explained to her that she was not required to sign it as part of Plaintiff’s admission to College Vista. (Id.)

Generally, “one who accepts or signs an instrument, which on its face is a contract, is deemed to assent to all its terms, and cannot escape liability on the ground that he [or she] has not read it.” (Ramos v. Westlake Services LLC (2015) 242 Cal.App.4th 674, 686 [internal quotes omitted].) “[A] person with capacity of reading and understanding an instrument signs it, he may not, in the absence of fraud, imposition or excusable neglect, avoid its terms on the ground he failed to read it before signing it.” (Bauer v. Jackson (1971) 15 Cal.App.3d 358, 370.)

The Agreement states in bold letters: “Residents shall not be required to sign this arbitration agreement as a condition of admission to this facility or to continue to receive care at the facility.” (Esquer Decl. Ex. A.) However, Defendants failed to present evidence showing that Ms. Safarian signed the Agreement knowing it was not part of Plaintiff’s admission package.

Ms. To’s declaration does not rebut Ms. Safarian’s assertion that the Agreement was never explained to her; that Ms. To told Ms. Safarian that signing the agreement was necessary for Plaintiff’s admission to College Vista, or that the Agreement was presented as a stand-alone agreement separate from the admission paperwork. “There was no explanation provided except that the papers were necessary for his admission.” (Safarian Decl. ¶ 3.)

Title 42 of the Code of Federal Regulations, section 483.70, in the relevant part:

“If a facility chooses to ask a resident or his or her representative to enter into an agreement for binding arbitration, the facility must comply with all of the requirements in this section.

(1) The facility must not require any resident or his or her representative to sign an agreement for binding arbitration as a condition of admission to, or as a requirement to continue to receive care at, the facility and must explicitly inform the resident or his or her representative of his or her right not to sign the agreement as a condition of admission to, or as a requirement to continue to receive care at, the facility.”

(42 C.F.R. § 483.70 subd. (n)(1).)

Given that Ms. Safarian’s declaration states that she relied on the representations that the paperwork needed to be signed as a condition of Plaintiff’s admission to College Vista, the Court cannot find that the Agreement complied with section 483.70.

Moreover, Duane Esquer’s declaration cites inadmissible evidence since the documents have not been properly authenticated. Defendants fail to point to any evidence that shows Plaintiff authorized Ms. Safarian to act on his behalf or that Ms. Safarian had the authority to bind Plaintiff to the arbitration agreement when she purportedly signed it.

Ms. Safarian’s declaration asserts that Plaintiff suffered from dementia and that her father’s native language was Armenian and due to his condition, he spoke almost entirely in Armenian. (Safarian Decl. ¶ 6.) Ms. To’s declaration does not indicate what language Plaintiff communicated with her in or if Plaintiff had a different native language other than English. Ms. To’s pre-filled Declaration Form only states “I spoke to him or her or them in English” with the native language section left blank. (Esquer Decl. Es. A.) It is unclear from Ms. To’s declaration, to whom she allegedly spoke with regarding the Agreement.

Code of Federal Regulation, section 483.70 further states:

“(2) The facility must ensure that:

(i) The agreement is explained to the resident and his or her representative in a form and manner that he or she understands, including in a language the resident and his or her representative understands;

(ii) The resident or his or her representative acknowledges that he or she understands the agreement[.]”

(42 C.F.R. § 483.70 subd. (n)(2).)

Again, given the deficiencies in Ms. To’s declaration, the Court cannot find that the agreement complied with section 483.70.

Enforceability of Agreement Despite Violations of Section 483.70

In their reply, Defendants raise the argument that the Agreement is enforceable even if it failed to comply with 42 C.F.R. section 483.70 §§ (n)(1-2). The one case on point on this issue, as cited by Defendant College Vista, is Northport Health Servs. of Arkansas, LLC v. U.S. Dept. of Health and Human Servs., 438 F.Supp.3d 956, 966-67 (W.D. Ark.), hereinafter Northport Health Servs.

The Final Rule at issue in Northport Health Servs was 42 C.F.R. §§ 483.70(n)(1- 4.) as promulgated by the Centers for Medicare and Medicaid Services (CMS). (See Northport Health Servs, supra, 438 F.Supp.3d at 964.) The District Court held that violations of 42 C.F.R. §§ 483.70 would not render an arbitration agreement unenforceable because to hold otherwise would be in conflict with the FAA. “Thus, if the failure to comply with the procedural requirements in the Final Rule were a basis for holding an agreement to arbitrate invalid and unenforceable, the Rule would indeed conflict with the FAA.” (Id. at 966.)

“[T]he Final Rule places requirements on the use of arbitration agreements that do not undermine the validity or enforceability of the agreement when it comes before a court. Imagine, for example, that a nursing home participating in the Medicare and Medicaid programs had a resident sign an agreement to arbitrate without having ‘explained [it] in a form and manner that he or she understands’ and without having received the resident's ‘acknowledge[ment] that he or she understands that agreement,’ in violation of 42 C.F.R. §§ 483.70(n)(2)(i) & (ii). If the nursing home subsequently sought to enforce the agreement in court, the nursing home's violation of the Final Rule would not prevent enforcement. Since failure to comply with the Rule's requirements does not prevent the enforcement of arbitration agreements between an LTC facility and a resident, the Court finds no conflict with the FAA.”

(Id. at 966–967 [italics original].)

The 8th Circuit affirmed the ruling in Northport Health Servs finding that the Final Rule did not invalidate and render unenforceable any arbitration agreement because the CMS did not have the power to annul a valid contract and the Final Rule only establishes the conditions for receipt of federal funding through the Medicare and Medicaid programs. (Northport Health Services of Arkansas, LLC v. U.S. Department of Health and Human Services (8th Cir. 2021) 14 F.4th 856, 868, cert. denied.)

“So, for example, if an LTC [Long Term Care] facility entered into an arbitration agreement with a resident without complying with the Revised Rule by requiring the resident to sign as a condition of admission to the facility, see 42 C.F.R. § 483.70(n)(1), the arbitration agreement would nonetheless be enforceable, absent a showing of ‘generally applicable contract defenses, such as fraud, duress, or unconscionability,’ (Citations.) CMS would simply enforce the regulation through a combination of administrative remedies, including denial of payment and civil monetary penalties.”

(Id.)

Accordingly, the Court agrees that any purported failure to comply with the arbitration provisions in section 483.70 does not render the Agreement unenforceable.

However, Defendants still bear the burden of showing that the Agreement, including the Delegation Clause, was binding on Plaintiff when Ms. Safarian signed the Agreement.

Ms. Safarian’s Lacked Authority to Bind Plaintiff to Agree to Arbitration

Even if Defendants can show that the agreement was valid and enforceable under section 483.70, Plaintiffs fail to show the agreement is binding on Plaintiff. Defendants do not dispute that Ms. Safarian did not have power of attorney at the time of Plaintiff’s admission to College Vista and the signing of the Agreement. However, Defendants argue that because Ms. Safarian made representations that she had the authority to sign the Agreement as the representative of Plaintiff, Plaintiff is bound by the Agreement.

The Advance Directive Acknowledgement for Plaintiff was signed by Ms. Safarian as his representative and on Plaintiff’s behalf, but Ms. Safarian clarified that Plaintiff had not executed an Advance Directive. The fact that Ms. Safarian signed as a representative of Plaintiff does not mean she represented that she had the legal authority to bind Plaintiff to the Agreement or that she represented to Defendants that she had power of attorney. (See Garrison v. Superior Court (2005) 132 Cal.App.4th 253, 265 [finding that power of attorney gave agent authority to bind Plaintiff to the arbitration agreement.].) Moreover, unlike the Plaintiff in Logan v. Country Oaks Partners, LLC (2022), there was no signed advance directive. (Logan v. Country Oaks Partners, LLC (2022), 82 Cal.App.5th 365, 374, petition for review granted on November 16, 2022.)

“[A]n agency cannot be created by the conduct of the agent alone; rather, conduct by the principal is essential to create the agency. Agency ‘can be established either by agreement between the agent and the principal, that is, a true agency [citation], or it can be founded on ostensible authority, that is, some intentional conduct or neglect on the part of the alleged principal creating a belief in the minds of third persons that an agency exists, and a reasonable reliance thereon by such third persons.’” (Flores v. Evergreen at San Diego, LLC (2007) 148 Cal.App.4th 581, 587-588 [italics original], citing Lovetro v. Steers (1965) 234 Cal.App.2d 461, 474–475.)

In Flores v. Evergreen at San Diego, LLC (2007), the Court of Appeal declined to find an agency relationship existed between husband and wife when the husband signed the wife’s admission forms, including an arbitration agreement, due to the wife’s dementia. (Flores, supra, (2007) 148 Cal.App.4th 581.) The Appeal Court found that because there was no evidence presented by the defendant that the wife assented to the agency relationship or ratified her husband’s conduct after the power of attorney from was signed, the arbitration agreement was not binding on the wife. (Id. [“The record is completely silent regarding Josephina's and Luis's dealings prior to her admission and/or their interactions at the time of her admission. The mere fact Luis signed the admission documents, including the arbitration agreements, is insufficient.”].)

Like the plaintiffs in Flores v. Evergreen at LLC (2007), the Defendants’ motion is silent on Ms. Samarian’s and Plaintiff’s relationship to allow the Court to determine that Plaintiff assented to Ms. Samarian being his agent. Ms. To’s Declaration is completely devoid of details as to how Ms. To determined that Plaintiff authorized Ms. Samarian to be his representative. Of the paperwork submitted by Defendants, only the October 10, 2020, Surgical Consult Consent form indicated that Plaintiff cannot consent and that Ms. Safarian is opting for conservative medical management. (Esquer Decl. ¶ 8.) There are no other facts cited by Defendants indicating that Plaintiff, either expressly or with implied authority, authorized Ms. Safarian to be his agent.

Moreover, Defendants fail to state facts as to Plaintiff’s conduct that supports a finding that Ms. Safarian acted with apparent authority when she signed the Agreement.

“Ostensible agency cannot be established by the representations or conduct of the purported agent; the statements or acts of the principal must be such as to cause the belief the agency exists.” (J.L. v. Children's Institute, Inc. (2009) 177 Cal.App.4th 388, 404.) The documents Ms. Safarian is alleged to have signed as an agent of Plaintiff are not enough to show she acted with apparent authority because they do not show that Plaintiff represented to Defendants that she was his agent. The acts that induce Defendants’ reliance that Ms. Safarian was an agent of Plaintiff must be based on Plaintiff’s representations, not Ms. Safarian’s. Here, Defendants fail to state any facts regarding Plaintiff’s representations that show Ms. Safarian acted with apparent authority when she signed the Agreement.

There are no facts in Ms. To’s declaration sufficient to support a finding that Ms. Safarian acted with apparent authority when the Agreement was signed. Therefore, Defendants have failed to show that Plaintiff is bound by the Agreement through agency law. Moreover, in their replies, Defendants do not address Plaintiff’s contention that Ms. Safarian lacked authority to bind Plaintiff and instead raise new arguments.

Applicability of Doctrine of Equitable Estoppel

On reply, Defendant College Vista for the first time raises the argument of the Doctrine of Equitable Estoppel to compel Plaintiff, as a non-signatory, to arbitrate his dispute. “A nonsignatory plaintiff can be compelled to arbitrate a claim even against a nonsignatory defendant, when the claim is itself based on, or inextricably intertwined with, the contract containing the arbitration clause.” (JSM Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1241.)

Since this issue is raised for the first time on reply and Plaintiff has not had time to brief the issue, the Court finds that the record is incomplete to allow this Court to find that the Doctrine of Equitable Estoppel applies. (See JSM Tuscany, LLC, supra, 193 Cal.App.4th at 1244. (“However, the record before us (and before the trial court) is insufficient to enable that determination. Thus, the trial court did not err in denying the motion to compel arbitration without prejudice.”].)

Should Defendants seek to renew their motion, “they must support the motion with exhibits and, if necessary, declarations, demonstrating that all causes of action . . . are inextricably intertwined with the obligations imposed” by the arbitration agreement. (See JSM Tuscany, LLC, supra, 193 Cal.App.4th at 1244.)

Similarly, the other Sum Mar Defendants also raise for the first time in their reply, that as alter egos of a signatory to the Agreement, they can enforce the Agreement. The Court will not consider the issue because it is raised for the first time in its reply. “Points raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.” (American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453.)

Based on the foregoing, the Motion is DENIED WITHOUT PREJUDICE.

Conclusion

Defendants’ Motion to Compel Arbitration is DENIED WITHOUT PREJUDICE.

Moving party to provide notice.