California Mediation and Arbitration

Arbitration, Section 1295: Fourth District, Div. 1 Holds That Arbitration Agreement In Medical Service Contract Is Effective On Execution

Justice Huffman Dissents.

        Baker v. Italian Maple Holdings, LLC, D069797 (4/1  7/31/17) (Aaron, O'Rourke; Huffman, dissenting), an elder abuse, negligence, wrongful death case, holds that a medical services agreement becomes effective upon execution, and that the 30-day "cooling off" period in Cal. Code of Civ. Proc. section 1295 is not a condition precedent to enforceability.  As a result, the party's death during the 30-day rescission window does not invalidate an otherwise enforceable agreement.

        The Court primarily relies on the statutory language in 1295(c), "Once signed, such a contract governs . . . until or unless rescinded by written notice within 30 days of signature."  The Legislature could have drafted, but did not draft, a provision requiring the passage of a 30-day grace period before the contract would become effective.  Here, the decedent passed away shortly after signing, but before the 30-day period had passed, and she did not rescind the agreement.

        The Court recognizes, "our result is in conflict with the interpretation of section 1295, subdivision (c) provided by the court in Rodriguez [v. Superior Court, 176 Cal.App.4th 1461 (2009)]".  The Court did not follow Rodriguez because it believed Rodriguez failed to follow the statutory language.

        Because the trial court had relied on Rodriguez to deny Defendants' petition to compel arbitration, its order was reversed.

        Justice Huffman dissents.  He argues that under the facts of this case, it is impossible to know whether the decedent knowingly and voluntarily waived her constitutional right to a  jury trial.  Justice Huffman explains that the defendant's attorney authenticated the arbitration agreements, without an explanation as to  how the attorney could have personal knowledge, and that the circumstances under which the decedent had signed the agreement were largely unknown.

        COMMENT:  The trial court and the Court of Appeal did not address whether the provision in section 1295(c) violates the Federal Arbitration Act and is thus preempted.  The issue was raised by Defendants as a second line of defense, but it was unnecessary to decide the issue.

Arbitration, Medical Malpractice, FAA: Federal Arbitration Act Preempts California’s Statutory 30-Day Rescission Provision Applying To Arbitration Of Medical Malpractice Disputes

For Preemption Purposes, “Involving Commerce” In The FAA Is Broader Than “In Commerce”, Making It Easy To Find Preemption.

     Physicians don’t like to defend medical malpractice cases in front of juries, and Scott v. Yoho, B265641 (2/5  6/22/16) (Turner, Kriegler, Kumar) will make it easier for them to arbitrate malpractice cases and avoid juries in California under a broadly worded arbitration provision. 

     After Kenisha Parker died, following lipoplasty and suction lipectomy, her relatives sued Dr. Yoho and New Body Cosmetic Surgery Center for wrongful death, malpractice, and survivorship causes of action.  Defendants moved to compel arbitration, based on three arbitration agreements.  The trial court found that the third agreement, which was the most recent, governed, but that it was unenforceable, because Ms. Parker, who died within hours of signing it, did not have the opportunity to rescind, as required by Cal. Code of Civ. Proc., section 1295(c).

      Reversed.  The Court of Appeal  holds that the 30-day rescissionary period provided by section 1295(c) is preempted by the Federal Arbitration Act, because, “the rescission right only exists in the context of the provision of arbitration of medical care disputes.”  Because this provision only applies in the context of arbitration, it is preempted by the FAA, which does not allow a state to place a greater burden on arbitration than on litigation.  AT&T Mobility LLC v. Concepcion, 517 U.S. 333, 339 (2011).  Thus, if the patient dies from medical malpractice shortly after signing the arbitration agreement, the statutory rescissionary right is of no effect, whenever the FAA applies.

       While this part of the ruling invalidating a California statute protecting patient rights is important, so too is the Court’s conclusion that the FAA reached this transaction, given that the patient, the doctor, and the surgery occurred in California, and the contract provide for venue in LA Superior Court in Pasadena, and jurisdiction in California.

        The uncontroverted evidence showed that 20 percent of the medical supplies were shipped from out of state, some of the materials used for liposuction came from out-of-state, defendants advertised on the internet and communicated out-of-state by telephone, mail and e-mail, 5% of the patients came from outside the state, and there were business contacts with various out-of-state businesses. 

        At first blush, this might still seem like an in-state commercial transaction, because the procedure was conducted in California by a California doctor on a California patient.  But the Court holds that there is “a sufficient nexus with interstate commerce to require enforcement” of the agreements under the FAA.  Relevant to the Court’s conclusion is that the FAA, specifically, 9 U.S.C. section 2, applies to transactions “involving commerce” – words that have been broadly interpreted to mean “affecting” commerce, which is broader even than “in commerce.”  The fact that venue and jurisdiction provisions were local to California carried no weight, because the provisions did not govern choice of law.

        That left the Court with the task of distinguishing Rodriguez v. Superior Court,176 Cal.App.4th 1461 (2009), a case that enforced the rescissionary right in section 1295.  Easy:  there was no issue concerning preemption by the FAA in Rodriguez. Here, the defendants made a factual showing as to why the transaction is governed by interstate commerce.

Arbitration/Section 1295/Section 1281.2: Fourth District, Division 2 Affirms Denial Of Petition To Arbitrate Wrongful Death Claim Against Senior Living Center Outside Context of CCP Section 1295

In Which We Inaugurate A New Side Bar Category:  Section 1295 (Medical Malpractice)

 

 

     “The Patient.”  Frederic Dorr Steele, artist.  1901.  Library of Congress.

    The plaintiff in the next case, Norma Daniels, is alive.  Her mother, Margaret Barcenas, is dead.  Ms. Daniels sued a residential care facility for the elderly (RCFE), its owners and its operators, for elder abuse and related claims (survivor claims), as well as for wrongful death.  The trial court denied defendants’ petition to compel arbitration on the grounds(i) that Daniels was a third party to the arbitration agreement, and also, (ii) that there was a possibility of conflicting rulings if the survivor claims were arbitrated, and the wrongful death claim was not arbitrated.  Daniels v. Sunrise Senior Living, Inc., E054472 (4th Dist. Div. 2 January 4, 2013) (King, J., author) (certified for publication).

     The Court of Appeal affirmed, despite the fact that the agreement with the RCFE contained a broad arbitration clause, covering all claims relating to the mother’s care received at the RCFE, the clause was binding on the mother’s heirs, and Daniels had signed the agreement.  Notwithstanding those bumps in the road, the road to affirmance was relatively direct.

     First, Daniels did not sign in her personal capacity, but as her mother’s attorney in fact, allowing her to be treated as a third party to the agreement.

     Second, while the survivor claims were brought in Daniel’s capacity as an heir, the wrongful death claim was brought in her personal capacity.  “Unlike some jurisdictions wherein wrongful death actions are derivative, Code of Civil Procedure section 377.60 ‘creates a new cause of action in favor of the heirs as beneficiaries, based upon their own independent pecuniary injury suffered by loss of a relative, and distinct from any the deceased might have maintained had he survived. . . . ‘”  Horwich v. Superior Court, 21 Cal.4th 272, 283 (1999).  In her personal capacity, Daniel retained her third party status.

     Third, the case is distinguishable from Ruiz v. Podolsky, 50 Cal.4th 838 (2010) and Herbert v. Superior Court, 169 Cal.App.3d 718 (1985), cases holding nonsignatories to an arbitration agreement must arbitrate wrongful death claims against a health care provider when the decedent agreed to arbitrate medical malpractice claims pursuant to Cal. Code Civ. Proc. 1295.  Section 1295 governs agreements to arbitrate professional negligence or medical malpractice claims in medical services contracts.  Section 1295, however, includes notice safeguards to ensure a person makes an informed choice about arbitration – none of which were present here.  The Court explains that “this is the critical distinction between Herbert and Ruiz and the present case.”” Thus, a policy argument based on an analogy to cases involving 1295, which has its own built-in safeguards, held no attraction here.  (Note:  the Court points out there is no “statutory analog to section 1295, applicable to RCFE’s nonhealth care providers or to claims other than professional negligence . . . “.  Perhaps a lobbyist will now step forward to try and plug the gap.) 

     Fourth, Cal. Code of Civ. Proc. 1281.2(c) allows a court to refuse to compel arbitration if there is a danger of inconsistent rulings on common questions of law or fact.  Here, the possibility that survivor claims could be ordered to arbitration, whereas Daniels’s wrongful death claim could not be, presented “a possibility of inconsistent rulings on the claims given that the claims are based on the allegation that Barcenas received inadequate care at Sunrise. . . . Because the trial court’s discretionary ruling does not exceed the bounds of reason, we will not disturb it.”

     This case involves no analysis of federal case law or of the Federal Arbitration Act.  Perhaps federal law was simply irrelevant, given the Court’s conclusion that Daniels was not a party to an arbitration agreement.

      Does anyone believe that the gross facts alleged in this case – pressure sores on heels and ankles, followed by “septic shock, pneumonia, dehydration, and a staph infection”, followed by death of the plaintiff’s 93 year old mother, had any impact on the judges’ decision allowing the plaintiff her day in court?

       

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.