Arbitration/Fees/Waiver/Severability/Standard of Review : In Elder Abuse Case, Court of Appeal Affirms Severance From Arbitration Clause of Waiver of Plaintiff’s Statutory Right to Recover Attorney’s Fees

 

Fifth District Explains That By Submitting A Dispute to An Arbitral Forum, A Party Does Not Necessarily Forgo Substantive Statutory Rights

     Plaintiff Ruth Chappell (replaced by her trustee Bickel after she died) sued an assisted living facility, Sunrise Assisted Living, for Elder Abuse. Chappell’s written agreement with Sunrise included an arbitration clause specifying each party would bear its own fees and costs in arbitration. Sunrise petitioned to compel arbitration. The trial court granted the petition, but severed the provision that provided each side was to bear its own fees and costs. That provision amounted to a waiver of plaintiff’s statutory right to recover attorney’s fees if she prevailed on her Elder Abuse claim – a waiver the trial court found to be against public policy. After plaintiff prevailed in the arbitration and was awarded very substantial attorney’s fees ($666,725.30) and costs ($94,694.70), Sunrise appealed the trial court’s decision severing the attorney’s fees and cost provision. Bickel v. Sunrise Assisted Living, Case No. F062443 (5^th Dist. May 21, 2012) (Kane, J., author) (certified for publication).

     “Any one may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.” Cal. Civ. Code section 3513. Because the court determines whether the statute in question is for a public or a private benefit, the issue is reviewed here de novo.

     Here, the Court of Appeal concluded that the fee shifting provision of the Elder Abuse Act is for a “public benefit”: “the heightened remedies enacted in section 15657 were remedial measures designed to correct a significant problem affecting a highly vulnerable segment of our society.” Accordingly, the statutory rights were created for a public purpose and therefore not waivable by a private agreement. Because the arbitration agreement was not generally permeated by unconscionability, the trial court correctly ordered arbitration, while severing the objectionable waiver of statutory rights intended to be for a public benefit. Judgment affirmed.

     COMMENT:  On March 27, 2012, we blogged that, in a nursing home case, the United States Supreme Court slammed the Supreme Court of Appeals of West Virginia, for “misreading and disregarding the precedents of this Court” interpreting the Federal Arbitration Act, and for failing to follow controlling federal law. Marmet Health Care Center, Inc. v. Brown, 565 U.S. ____ (2012). The West Virginia court had "concluded that the FAA does not pre-empt the state public policy against predispute arbitration agreements that apply to claims of personal injury or wrongful death against nursing homes." While the United States Supreme Court’s application of the FAA may have shut the door to the courthouse, the approach taken in Bickel shows that it may still be possible to implement an agreement to arbitrate, while preserving unwaivable statutory rights with a little help from the doctrine of severability.