Arbitration: Third District Rules That FAA Does Not Preempt California Arbitration Statute Allowing for Denial of Arbitration Where There Is Possibility of Conflicting Rulings

 

Elder Abuse of Parent and Emotional Distress of Daughter Set Up Possibility of Conflicting Rulings

     The trial court denied motions of operators of skilled care nursing facilities to compel arbitration of parent’s Elder Abuse claim that was subject to arbitration. Why? Because the daughter’s claim of emotional distress caused by her mother’s alleged abuse created the possibility of conflicting rulings. Cal. Code Civ. Proc. section 1281.2. Defendants appealed. Bush v. Horizon West, C067277 (3^rd Dist. April 9, 2012) (not to be published).

     Above:  Nurse caring for elderly patient. c1906.  Library of Congress.

     Defendants’ chief argument was that the California statutory provision allowing for denial of the motions to compel arbitration was preempted by the Federal Arbitration Act. However, in an earlier case involving Stanford University, the Supreme Court held that “where the parties have agreed that their arbitration agreement will be governed by the law of California,” (which was also the case in Bush v. Horizon West), “application of [section 1281.2(c)] is not preempted by the [FAA].” Volt Info. Sciences v. Stanford Univ., 489 U.S. 468, 470 (1989).

     Okay, so section 1281.2(c) is not preempted where the parties have agreed that the contract will incorporate California law. But section 1281.2(c) also provides that “[t]his 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.” Section 1295 requires particular language be included in an agreement to arbitrate as to the professional negligence of a health care provider, and that language was employed in the agreement here. That gave Defendants a fall-back argument: the exemption for arbitration of medical malpractice claims meant that section 1281.2(c), by its terms, did not apply. The Court of Appeals brushed off that argument of Defendants, pointing out that here, neither the mother nor her daughter had sued for medical malpractice. Instead, the mother had sued for Elder Abuse, and the daughter sued for infliction of emotional distress.

     That was not the end of it, however. Defendants argued that the daughter was not a third party to the arbitration agreement, because of the closeness of the parties, and that therefore, the daughter could also be bound by the arbitration provision. In fact, the California Supreme Court recently held that, “when a person seeking medical care contracts with a health care provider to resolve all medical malpractice claims through arbitration,” the agreement applies “to the resolution of wrongful death claims, when the claimants are not themselves signatory to the arbitration agreement.” Ruiz v. Podolsky, 50 Cal.4^th 838, 841 (2010). At first blush, Ruiz seems close to the situation here, but courts are in the business of drawing distinctions. Here, neither the mother’s nor the daughter’s claims were for wrongful death, and the daughter’s claim for emotional distress – to her – was distinct from the mother’s claim for Elder Abuse. Therefore, Ruiz was not controlling.

     Separately, Defendants argued “equitable estoppel.” A nonsignatory who sues on a contract can sometimes be equitably estopped from disclaiming the binding effect of an arbitration provision in the contract sued upon. You take the benefits, you accept the burdens. The problem for Defendants here is that the daughter’s claim for negligent infliction emotional distress is not a contract claim.

     Finally, Defendants made a policy argument, reminding one of a variant of that old adage: if the facts are against you, argue the law, if the law is against you, argue the facts, and if both are against you, argue policy [or: bang the table]. Concluding that section 1281.2(c) is not preempted, and that the trial court did not abuse its discretion in exercising its power under the statute, the Court of Appeal said, “we can do no more.”

     Result: The orders denying the motions to compel arbitration were affirmed in a 3-0 decision authored by Justice Robie.