2017-00220024-CU-MM

William James Arnold vs. Kaiser Foundation Hospitals

Nature of Proceeding: Petition to Compel Arbitration and Stay Action

Filed By: Ngo, Denise

*** If oral argument is requested, the parties are directed to notify the clerk and opposing counsel at the time of the request which of the primary issues presented here will be addressed at the hearing. Counsel are reminded that pursuant to Local Rules, only limited oral argument is permitted on law and motion matters. ***

Defendants Kaiser Foundation Health Plan, Inc. (“Health Plan”) and Kaiser Foundation Hospitals (“KFH”) (collectively “Kaiser”) petition to compel arbitration and to stay proceedings pending completion of arbitration is GRANTED, as follows.

Kaiser’s notice of hearing on petition fails to provide the correct address for Dept.

53/54.

Although Code of Civil Procedure §1290 et seq. does not expressly permit “reply” briefs, Kaiser’s was nevertheless considered here.

Plaintiff opposition fails to comply with CRC Rule 3.1113(f).

Factual Background

The First Amended Complaint (“1AC”) in this case alleges that the Kaiser defendants and Windsor El Camino Care Center (“Windsor”) engaged in dependent adult abuse, violations of Health & Safety (“H&S”) Code’s Patient Bill of Rights (”PBOR”) and negligent conduct in connection with their care of plaintiff over the course of several months in 2017 following a fall at his home.

Moving Papers. Kaiser argues that the agreement by which plaintiff was enrolled in the Health Plan contains an provision requiring him to submit binding arbitration all claims arising from or relating to the agreement or his relationship to Kaiser or another organization with which Kaiser contracted, “irrespective of the legal theories” asserted. More specifically, Kaiser contends that plaintiff became enrolled as a member of the Health Plan by virtue of an Agreement for Group Coverage between Health Plan and CalPERS’ Board of Administration, the latter of which administered the enrollment process. The subject arbitration clause is contained in the 2017 CalPERS Evidence of Coverage (“EOC”) Document, a copy of which was mailed by Kaiser to newly-enrolled members but for existing members, Kaiser mailed to pre-existing members “postcards with business reply cards” by which they can either view an electronic version or obtain a hardcopy of the EOC document.

According to Kaiser, the arbitration provision is enforceable under the Federal Arbitration Act (“FAA”) and California procedural law and the requirements of H&S Code §1363.1 [form and placement of disclosure of health care service plan’s binding arbitration clause] are inapplicable to enrollments controlled by CalPERS pursuant to its statutory authority (see, e.g., Gov. Code §§22796, 22863, 22869 [“Information disseminated by the board pursuant to Section 22863, and compliance with regulations of the board…, shall be deemed to satisfy the requirements of Chapter 2.2 (commencing with Section 1340) of Division 2 of the [H&S] Code” (underline added for emphasis)]), rather than being administered by the Health Plan itself.

Kaiser further asserts that express terms of the arbitration clause encompass all of the claims being asserted in the present case given that it covers “[a]ny dispute” which arises from or is related to an “alleged violation of any duty incident to or arising out of or relating to” the EOC or the member’s relationship to Kaiser regardless of the legal theories being advanced but explicitly including medical malpractice. Moreover, arbitration is justified pursuant to equitable estoppel inasmuch as he has requested and received benefits under the EOC and is therefore obligated to fulfill his reciprocal obligations thereunder.

Finally, the moving papers maintain that the presence of defendants other than Kaiser (i.e., Windsor) does not preclude arbitration particularly since Kaiser had a contract with Windsor which itself requires arbitration pursuant to Kaiser’s EOC and that a court may not deny arbitration pursuant to Code of Civil Procedure §1281.2(c)’s “possibility of conflicting rulings on a common issue of law or fact” language when there is an agreement under §1295 to arbitrate professional negligence claims against a health care provider. To be sure, the FAA preempts §1281.2(c)’s provision to the extent the

latter conflicts with the FAA’s express provision in section 2, specifying that written agreements to arbitrate are valid, irrevocable and enforceable except where existing law or equity would permit revocation of any contract.

Opposition. Plaintiff opposes, arguing first that the FAA does not apply to the subject arbitration agreement but this is not borne out by the Smith v. PacifiCare or Pagarian v. Superior Court decisions, which in pertinent part merely held that the FAA does not preempt the disclosure requirements found in H&S Code §1363.1 and which does not appear responsive to any contention made in the moving papers.

The opposition next insists that enrollments under CalPERS are not exempt from the requirements of H&S Code §1363.1 inasmuch as (1) Kaiser’s mailing to enrollees beginning in 2009 a simple postcard explaining how to view or receive a complete copy of the EOC was insufficient notice of the EOC’s contents and arbitration clause especially since such a postcard could be either disregarded as junk mail or go unseen altogether and (2) Kaiser has offered no evidence showing that such a postcard was in fact mailed to the plaintiff in this case. The opposition adds that the failure to comply with §1363.1’s requirements, even if considered only “technical violations” of these provisions, effectively precludes the court from ordering arbitration here and that Kaiser’s arbitration clause also fails to comply with the requirements of Code of Civil Procedure §1295 [relating to arbitration of professional negligence claims].

Finally, plaintiff contends this court should deny arbitration pursuant to Code of Civil Procedure §1281.2(c) given the “possibility of conflicting rulings on a common issue of law or fact” as a result of at least one defendant (i.e., Windsor) not being the beneficiary of a compulsory arbitration clause. Although a copy of the 1AC is attached to the opposition, the court finds no evidence was submitted by plaintiff in connection with this matter.

Reply. Kaiser maintains that it has made a prima facie showing of a valid arbitration clause encompassing claims now alleged by plaintiff and thereby shifted to the latter the burden to produce evidence showing the absence of such an agreement or some valid ground to render the agreement unenforceable but the opposition here includes no evidence whatsoever, thereby effectively admitting not only that he was enrolled as a member of the Health Plan pursuant to its agreement with CalPERS but also that the EOC contains a broad provision for arbitration of the types of claims now alleged in the 1AC. In short, plaintiff has not set forth any valid ground on which this court may deny arbitration as sought by this petition.

According to Kaiser, the opposition fails to demonstrate that CalPERS is not exempt from the affirmative requirements found in H&S Code §1363.1 pursuant the express language of Government Code §22869 but for some reason instead proceeds to argue that because the arbitration clause in the EOC does not §1363.1’s requirements, it is unenforceable, a claim that runs counter to the plain import of §22869.

The reply next points out that plaintiff’s suggestion about CalPERS’ procedure of using postcards to enrollees rather than having a hardcopy of the EOC mailed to all members every year somehow violating Government Code §22863 does not withstand scrutiny since this statute mandates CalPERS make available each year a wealth of information relating to health coverage to ensure everyone is capable of making an “informed choice” among the available health coverage options and since the evidence submitted with the moving papers demonstrates CalPERS not only has a variety of

information available on the internet but also annually mails to every member an “open enrollment packet” containing a number of documents in compliance with §22863’s requirements.

Notwithstanding the foregoing, the Legislature has vested CalPERS with broad discretion in determining how to administer health coverage to the subscribers and notably, the opposition cites no authority which demonstrates that CalPERS’ decision not mail a hardcopy of the EOC to all enrollees each year is somehow required or that the use of a postcard to provide annual notice is insufficient as a matter of law. But even if CalPERS had not fulfilled its statutory obligations, this alone could not otherwise deprive Kaiser of the right to seek enforcement of its arbitration clause particularly where, as here, the enrolled received the benefits to which he was entitled and is therefore estopped from fulfilling his contractual obligations.

Similarly, plaintiff’s contention about that Kaiser’s arbitration clause failing to comply with the Code of Civil Procedure §1295 requirements for arbitration of professional negligence claims fails to account for the express exceptions found in subdivision (f). The opposition’s reliance on §1281.2(c) is also misplaced since the only other defendant named in this suit, Windsor, is also required to have the claims asserted against it resolved via binding arbitration by virtue the agreement between Kaiser and Windsor, making it impossible for there to be any “conflicting rulings on a common issue of law or fact.” Regardless, the final sentence of §1281.2(c) makes its provisions inapplicable to arbitration clauses made pursuant to §1295, rendering inapposite the authorities offered in the opposition.

Finally, the reply reasserts that the FAA does govern the subject arbitration agreement but clarifies that Kaiser nowhere suggested the FAA preempts in H&S Code §1363.1. Instead, it is Kaiser’s position that §1363.1 does not apply to the facts of this case because the health plan at issue here is administered by CalPERS and therefore is subject to the provisions of the Government Code, including §22869.

Request for Judicial Notice

Kaiser’s request for judicial notice is granted.

Objections to Evidence

Neither side (timely) filed written objections to evidence.

Analysis

Presumption Favoring Arbitration. At the outset, the court notes that under existing California law arbitration must be compelled where there is a valid, binding arbitration agreement unless the opposing party proves the agreement is unenforceable on unconscionability or other grounds. (See, e.g., Armendariz v. Foundation Health

(2000) 24 Cal.4th 83, 96-100, 114; Gatton v. T-Mobile USA (2007) 152 Cal.App.4th 571, 579.) Additionally, a number a California appellate decisions confirm that there are a number of factual scenarios where one who did not actually sign an agreement to arbitrate may nevertheless either compel arbitration of claims against him/her or be compelled to arbitrate his/her claims against another. (See, e.g., Metalclad Corporation v. Ventana Environmental Organizational Partnership (2003) Cal.App.4th 1705, 1713 [“[A] party who has not signed a contract containing an arbitration clause may

nonetheless be compelled to arbitrate when he seeks enforcement of other provisions of the same contract that benefit him”]; Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696 [there are exceptions to general rule that a nonsignatory cannot be compelled to arbitrate without being a party to the arbitration agreement; one exception is equitable estoppel]; Thornton v. Career Training Center, Inc. (2005) 128 Cal.App.4th 116 [third party beneficiary].)

In the case at bar, the opposition nowhere specifically asserts either that there is between plaintiff and Kaiser no valid, binding agreement to arbitrate or that Kaiser cannot compel arbitration of the claims alleged in the 1AC as a result of plaintiff’s not manifesting by a written signature his assent to the arbitration provision contained in the 2017 CalPERS EOC. Likewise, the opposition does not suggest that this arbitration clause is somehow inapplicable to the claims advanced by plaintiff in the 1AC nor could it, given the especially broad scope of the arbitration clause at issue and by its own terms encompassing all disputes arising out of or relating to the EOC or plaintiff’s relationship to Kaiser regardless of legal theory. Thus, coupled with the opposition’s failure to offer any (admissible) evidence whatsoever which tends to show either that the absence of a valid arbitration agreement as between plaintiff and Kaiser or that the arbitration language in the 2017 EOC does not govern plaintiff’s current claims against Kaiser, this court is bound by legal precedent to compel arbitration in this case unless plaintiff produced evidence sufficient to demonstrate the subject arbitration agreement is unenforceable as a result of unconscionability or other legal reasons.

Since the opposition does not include any argument that the arbitration clause sought to be enforced here was the result of either substantive or procedural unconscionability (both of which are required to invalidate an arbitration agreement), the court will first consider plaintiff’s primary contentions that enrollments administered by CalPERS are not exempt from the requirements of H&S Code §1363.1 and that even “technical violations” of §1363.1’s requirements mandate denial of the present petition, even if considered only “technical violations” of these provisions, effectively precludes the court from ordering arbitration here. As will now be shown, the opposition has failed to persuade this court that CalPERS-administered enrollments are not exempt from the provisions of H&S Code §1363.1.

H&S Code §1363.1. This statute, which is found in Article 4 [“Solicitation and Enrollment”] of Chapter 2.2 [“Health Care Service Plans”] in Division 2 pertaining to “Licensing Provisions,” provides in its entirety:

Any health care service plan that includes terms that require binding arbitration to settle disputes and that restrict, or provide for a waiver of, the right to a jury trial shall include, in clear and understandable language, a disclosure that meets all of the following conditions:

(a) The disclosure shall clearly state whether the plan uses binding arbitration to settle disputes, including specifically whether the plan uses binding arbitration to settle claims of medical malpractice.

(b) The disclosure shall appear as a separate article in the agreement issued to the employer group or individual subscriber and shall be prominently displayed on the enrollment form signed by each subscriber or enrollee.
(c) The disclosure shall clearly state whether the subscriber or enrollee is waiving his or her right to a jury trial for medical malpractice, other disputes

relating to the delivery of service under the plan, or both, and shall be substantially expressed in the wording provided in subdivision (a) of Section 1295 of the Code of Civil Procedure.

(d) In any contract or enrollment agreement for a health care service plan, the disclosure required by this section shall be displayed immediately before the signature line provided for the representative of the group contracting with a health care service plan and immediately before the signature line provided for the individual enrolling in the health care service plan.

It is undisputed that the arbitration clause in the 2017 EOC fails to comply with all of the above-cited requirements so the initial question that must be answered is whether Kaiser is correct in arguing that H&S Code §1363.1 is inapplicable when enrollment in the Health Plan is administered by CalPERS pursuant to its statutory authority. Part 5 of Division 5 of Title 2 in the Government Code is entitled “The Public Employees’ Medical and Hospital Care Act” and Chapter 1 relates to “Public Employees’ Health Benefits.” Article 3 of this Chapter relates to the authority of the “board” charged with administering such health benefits and §22796 provides in its entirety:

(a) The board shall, pursuant to the Administrative Procedure Act, adopt all necessary rules and regulations to carry out the provisions of this part including, but not limited to, any of the following:

(1) Regulations establishing the following:
(A) The scope and content of a basic health benefit plan.
(B) Reasonable minimum standards for health benefit plans.

(C) The time, manner, method, and procedures for determining whether approval of a health benefit plan should be withdrawn.

(2) Regulations pertaining to any other matters that the board may be expressly authorized or required to provide for by rule or regulation by the provisions of this part.
(b) In adopting rules and regulations, the board shall be guided by the needs and welfare of individual employees, particular classes of employees, the state and contracting agencies, as well as prevailing practices in the field of medical and hospital care.

Article 5 of Chapter 1 then addresses enrollment and coverage, with §22830(a) stating that an employee or annuitant may enroll in a health benefit plan approved or maintained by the board.

Article 6 of Chapter 1 specifically addresses health benefit plans and contracts which the board may enter even without competitive bidding. (Gov. Code §22850(a).) Also in Article 6 is §22863, which provides in pertinent part:

(a) The board shall make available to employees and annuitants eligible to enroll in a health benefit plan information that will enable the employees or annuitants to exercise an informed choice among the available health benefit plans. Each employee or annuitant enrolled in a health benefit plan shall be issued an appropriate document setting forth or summarizing the services or benefits to which the employee, annuitant, or family members are entitled to thereunder, the procedure for obtaining benefits, and the principal provisions of the health benefit plan.

(b) The board shall compile and provide data regarding age, sex, family
composition, and geographical distribution of employees and annuitants and

make continuing study of the operation of this part…

(c) The board shall, with the advice of and in consultation with persons or organizations having special skills or experience in the provision of health care services, study methods of evaluating and improving the quality and cost of health care services provided under this part.
(Underline added for emphasis.)

Notably, Article 6 of Chapter 1 concludes with §22869, which provides in its entirety:

Information disseminated by the board pursuant to Section 22863, and compliance with regulations of the board adopted pursuant to subdivision (a) of Section 22846 and Sections 22800 and 22831, shall be deemed to satisfy the requirements of Chapter 2.2 (commencing with Section 1340) of Division 2 of the [H&S] Safety Code.

(Underline added for emphasis.)

Based on this explicit language of §22869, the only real question left for the court to decide is whether H&S Code §1363.1 and its requirements for proper disclosure of arbitration provisions are found in Chapter 2.2 of Division 2 of the H&S Code but as explained above, §1363.1 is indeed contained in Chapter 2.2 of Division 2. Therefore, the information disseminated by CalPERS board in connection with the Health Plan’s 2017 EOC must as a matter of law be deemed to satisfy §1363.1’s requirements unless competent evidence reveals CalPERS did not comply with its statutory obligations in this case but as already pointed out, plaintiff offered no evidence whatsoever in support of his opposition, making it essentially impossible for this court to conclude CalPERS did not meet its statutory mandate. After all, §22796 undeniably grants vests in the CalPERS board broad discretion to adopt various “rules and regulations” deemed necessary to carry out its duties under the “The Public Employees’ Medical and Hospital Care Act,” including the administration of “Public Employees’ Health Benefits.” Regardless, while plaintiff raises questions about whether the use of postcards can provide an enrollee with adequate notice of an arbitration clause found within the EOC, plaintiff offered no legal authority that supports such a proposition (which in any event appears diametrically opposed to the unequivocal language in §22869). For essentially the same reason, the opposition’s suggestion that Kaiser offered no evidence establishing that a postcard relating to the 2017 EOC was in fact mailed to plaintiff is of no legal consequence especially since §22869 focuses on the information disseminated by the board of CalPERS, rather than the information which may have been disseminated by the individual provider.

Code of Civil Procedure §1295. In light of the foregoing, the court need not address plaintiff’s related contention that the arbitration provision in Kaiser’s EOC does not contain the language specifically required by Code of Civil Procedure §1295 but nevertheless, plaintiff’s contention lacks merit because it overlooks the exceptions found in subdivision (f), which provides in its entirety:

Subdivisions (a), (b), and (c) shall not apply to any health care service plan contract offered by an organization registered pursuant to Article 2.5 (commencing with Section 12530) of Division 3 of Title 2 of the Government Code, or licensed pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the [H&S] Code, which contains an arbitration agreement if the plan complies with paragraph (10) of subdivision (a) of Section 1363 of the Health and Safety Code, or otherwise has a procedure for notifying prospective

subscribers of the fact that the plan has an arbitration provision, and the plan contracts conform to subdivision (h) of Section 1373 of the Health and Safety Code.

(Underline added for emphasis.)

Since the opposition includes no evidence and therefore fails to demonstrate any non-compliance with subdivision (f)’s requirements, the court must reject plaintiff’s suggestion that the arbitration clause in Kaiser’s 2017 EOC is unenforceable due to a failure to comply with §1295(a)-(c).

Code of Civil Procedure §1281.2(c). The opposition further asserts that this court should deny the present petition to compel arbitration based on the language of §1281.2(c), which authorizes a trial court to decline to order arbitration where “A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” In short, plaintiff insists (albeit without meaningful discussion) that because defendant Windsor is not a party to the arbitration clause found in the 2017 EOC and plaintiff’s claims against Windsor need not be resolved via arbitration, there will be “a possibility of conflicting rulings on a common issue of law or fact” so as to justify an order denying arbitration of the claims against Kaiser as well. However, plaintiff’s position lacks merit for at least two reasons.

First, the opposition incorrectly assumes that plaintiff’s claims against Windsor in this case are not subject to compulsory arbitration. The opposition fails to account for not only the decisional law referenced in the first paragraph of the court’s analysis which holds there are a variety of scenarios whereby a non-party to an arbitration agreement may either compel arbitration him/her or be compelled to arbitration but also for the express language of the arbitration provision in the 2017 EOC. As reflected in Exhibit A to the Carlile Declaration, the EOC’s arbitration clause encompasses by its own terms claims against the various identified Kaiser-related entities as well as against “Any individual or organization whose contract with any of the [Kaiser-related] organizations…requires arbitration of claims brought by one or more Member Parties” (underline added for emphasis), while KFH’s own contract with Windsor attached as Exhibit E to the Broussard Declaration explicitly states the final paragraph:

In any dispute involving a Claimant [defined to include Kaiser “Members”], Contractor shall submit claims asserted by or against Contractor to binding arbitration, and Contractor shall accept and be bound by the arbitration provision of the Membership Agreement…in resolution of such claims. ( Underline added for emphasis.)

For this reason alone, plaintiff’s reliance on Code of Civil Procedure §1281.2(c) is simply misplaced.

Second, the opposition also fails to account for the final sentence of §1281.2(c), which provides in its entirety:

This 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.

(Underline added for emphasis.)

Because plaintiff’s own 1AC appears to include claims of professional negligence against at least one health care provider (i.e., KFH), this court concludes that it cannot rely on §1281.2(c) as a basis for denying arbitration of plaintiff’s claims against Kaiser.

Application of FAA. In light of the foregoing, this court need not determine whether the FAA applies to the arbitration clause at issue in this case.

Conclusion

For the reasons explained above, Kaiser’s petition to compel arbitration shall be granted.