Defendant’s petition to compel arbitration is DENIED.

BACKGROUND:

Plaintiffs commenced this action on 8/7/13 against defendant for: (1) elder abuse; (2) willful misconduct; (3) wrongful death; and (4) violation of Patients’ Bill of Rights. Plaintiffs are heirs and successors in interest to Teofilo Chale Noh (“Teofilo”). On 11/12/12, Teofilo, who was 79 years old at the time, was admitted to the care and protection of defendants for nursing, medical, and custodial care and treatment. (Compl., ¶ 9.) Teofilo had Alzheimer’s disease, dimentia, encephalopathy, and a history of falling, and was therefore a high risk of falling. (Id., ¶ 11.) Despite defendant’s knowledge of this fact, they left Teofilo unsupervised and unattended. (Ibid.) On 5/19/13, Teofilo fell from his bed and, because defendant failed to implement preventative safety measures, developed a hematoma that directly caused his death. (Ibid.)

On 2/21/14, the Court overruled defendant’s demurrer to the complaint and granted its motion to strike, in part.

ANALYSIS:

“A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (Cal. Code of Civ. Proc, §1281.) Section 1281.2 of the Code of Civil Procedure states in pertinent part:

On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for the revocation of the agreement.

(Cal. Code Civ. Proc., §. 1281.2.)

A proceeding to compel arbitration is in essence a suit in equity to compel specific performance of a contract. (Freeman v. State Farm Mutual Auto Insurance Co. (1975) 14 Cal.3d 473, 479.) Such enforcement may be sought by a party to the arbitration agreement. (Cal. Code Civ. Proc., § 1280, subd. (e)(1).)

The petition to compel arbitration functions as a motion and is to be heard in the manner of a motion, i.e., the facts are to be proven by affidavit or declaration and documentary evidence with oral testimony taken only in the court’s discretion. (Cal. Code Civ. Proc., §1290.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413 414.) The petition to compel must set forth the provisions of the written agreement and the arbitration clause verbatim, or such provisions must be attached and incorporated by reference. (Cal. Rules of Court, rule 3.1330; see Condee v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 218 19.)

In deciding a petition to compel arbitration, trial courts must first decide whether an enforceable arbitration agreement exists between the parties, and then determine the second gateway issue of whether the claims are covered within the scope of the agreement. (Omar v. Ralphs Grocer Co. (2004) 118 Cal.App.4th 955, 961.) “The petitioner bears the burden of proving the existence of a valid arbitration agreement by the 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. In these summary proceedings, the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination. No jury trial is available for a petition to compel arbitration.” (Engalla v. Permanente Medical Group, Inc.(2007) 15 Cal.4th 951, 972 [citations omitted].)

Defendant provides what is purported to be an arbitration agreement between the parties. (See Def. Exh. A.) As an initial matter, defendant fails to authenticate this document. (See Evid. Code, § 1400.) There is case law stating that once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement, and no evidence or authentication is required to find the arbitration agreement exists. (See Condee v. Longwood Mgt. Corp. (2001) 88 Cal.App.4th 215, 219.) The California Supreme Court, however, has found that the “petitioner bears the burden of proving [the arbitration agreement’s] existence by a preponderance of the evidence.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413. See also Banner Ent., Inc. v. Sup. Ct. (1998) 62 Cal.App.4th 348, 356 [citing Rosenthal].) “To the extent Condee conflicts with Rosenthal, our Supreme Court’s decision is controlling.” (Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1219, fn. 8 [citing Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455].)

In the moving papers, defendant does not properly authenticate the agreement. Defendant’s attorney, James Wold, states that the exhibit is a true and correct copy of the arbitration agreement. (Petition, p. 2:8-9.) There are two problems with this statement. First, there is no indication that Wold has any personal knowledge of the agreement such that he can authenticate it. Second, Wold simply states, as part of the petition, that the copy is true and correct. That statement is not made under penalty of perjury as part of any declaration. Thus, there is no declaration from a person with knowledge as to whether the copy is true and correct.

The purported agreement was entered into by Teofilo but was signed by Gregoria Chale as Teofilo’s “representative/agent.” Arbitration agreements are binding upon third parties having an agency or similar relationship with the signatory party. (See Matthau v. Sup. Ct. (2007) 151 Cal.App.4th 593, 599.) Parties seeking to compel arbitration on the ground of agency have the burden to show an express or implied consent to have the contracting party act as an agent in agreeing to arbitration. (Warfield, v. Summerville Senior Living, Inc. (2007) 158 Cal.App.4th 443, 448.)

In their opposition, plaintiffs argue that only a person with a durable power of attorney would have the authority to bind Teofilo. Certainly, a person with a durable power of attorney could bind Teofilo to arbitration. (Garrison v. Superior Court (2005) 132 Cal.App.4th 253, 265.) But that is not the case here.

In a similar situation – when there was no durable power of attorney – our Court of Appeal has held that a family member could not bind the patient to arbitration:

“Defendants bore the burden of establishing a valid agreement to arbitrate. Defendants admit Johnnie Pagarigan did not sign either arbitration agreement. They further admit Ms. Pagarigan was mentally incompetent at the time she was admitted to Magnolia Gardens and at the time her daughters signed the arbitration agreements approximately a week later. There was no evidence Ms. Pagarigan had signed a durable power of attorney. It necessarily follows Ms. Pagarigan lacked the capacity to authorize either daughter to enter into the arbitration agreements on her behalf. Consequently no valid arbitration contract exists.” (Pagarigan v. Libby Care Center, Inc. (2002) 99 Cal.App.4th 298, 301.)

Of course, even if there is no written authorization for agency (such as power of attorney), agency may still arise “by oral consent or by implication from the conduct of the parties.” (Flores v. Evergreen At San Diego, LLC (2007) 148 Cal.App.4th 581, 587.)

[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.” ([Citation.] “ ‘ “The principal must in some manner indicate that the agent is to act for him, and the agent must act or agree to act on his behalf and subject to his control.” … ‘ [Citations.] Thus, the ‘formation of an agency relationship is a bilateral matter. Words or conduct by both principal and agent are necessary to create the relationship ….’” [Citation.]

(Flores, 148 Cal.App.4th at pp. 587-588.)

Defendant provides no evidence that Gregoria Chale was granted power of attorney for Teofilo or that Teofilo indicated in some manner that Gregoria Chale was to act for him. Plaintiffs provide a declaration from Maria Gregoria Chale, who declares that, at the time of admission, Teofilo had Alzheimer’s disease and suffered from encephalopathy. (Chale Decl., ¶ 3.) She declares that she did not hold power of attorney for Teofilo. (Ibid.) She declares that she was asked by Violet Mercado to sign the admission paperwork and arbitration agreement on behalf of Teofilo. (Id., ¶ 7.) Regardless of whether Gregoria indicated that she was an agent, there is no evidence that Teofilo ever indicated to anyone that Gregoria Chale could enter into the arbitration agreement on his behalf.

Accordingly, defendant has not established the existence of a binding arbitration agreement between the parties.

Even if there were a binding arbitration agreement between defendant and plaintiffs, the Court would still, for the reasons indicated below, deny the petition. Courts have discretion to deny a petition to compel arbitration where there are third parties not subject to the arbitration agreement, and a possibility of conflicting rulings. (Code Civ. Proc., § 1281.2; Best Interiors, Inc. v. Millie & Severson, Inc. (2008) 161 Cal.App.4th 1320, 1329; Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 383, 394.) There are multiple plaintiffs suing in distinct capacities: on behalf of Teofilo and as individuals pursuant to statutory rights to wrongful death claims.

In Birl v. Heritage Care LLC (2009) 172 Cal.App.4th 1313, the plaintiffs, as successors-in-interest and in their individual capacities, filed an action against a healthcare provider and its various entities and against separate nursing facilities. (Id. at p. 1317.) One of the nursing facilities (Heritage) filed a petition to compel arbitration as to some of the causes of action alleged. (Ibid.) The trial court denied the petition pursuant to Code of Civil Procedure section 1281.2(c) and Health and Safety Code section 1599.81. (Id. at p. 1318.) The court of appeals found that the trial court did not abuse its discretion in denying Heritage’s petition to compel arbitration on the basis of a possibility of conflicting rulings on common issues of law or fact. (Birl, 172 Cal.App.4th at p. 1319.) The court looked to whether the other parties to the action are “third parties” to an action arising out of “the same transaction or series of related transactions” where there is a “possibility of conflicting rulings on a common issue of law or fact.” (Ibid. [quoting Code Civ. Proc., § 1281.2(c)].) The court noted, among other things, that the plaintiffs were third parties as to the claims brought in their individual capacities. (Birl, 172 Cal.App.4th at pp. 1321-1322.)

Here, most of the plaintiffs did not sign the arbitration agreement, and are thus third parties thereto as to their individual claims. (See, e.g., Fitzhugh v. Granada Healthcare and Rehabilitation Center, LLC (2007) 150 Cal.App.4th 469, 474-475 [wrongful death claims of nonsignatory heirs of a decedent are not subject to arbitration, notwithstanding contract language stating that arbitration provisions bind heirs and representatives of the signatory party].) Moreover, the agreement expressly excludes claims under the Patient’s Bill of Rights. (See Def. Exh. A, ¶ 3.3.)

Therefore, even if defendant had shown the existence of a valid arbitration agreement, the Court, in its discretion, would deny defendant’s petition pursuant to Code of Civil Procedure section 1281.2(c).

Finally, plaintiffs present evidence that the agreement is unconscionable. “[P]rocedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2004) 24 Cal.4th 83, 102.)

Plaintiffs argue that the agreement is procedurally unconscionable because Gregoria cannot read in English and because she was not provided with the applicable arbitration rules. (See Chale Decl., ¶¶ 6-14.) There is conflicting evidence as to whether the agreement was explained to Gregoria in Spanish. (See Mercado Decl., ¶¶ 5-7.)

Several cases have found that failure to provide a copy of the arbitration rules to which the employee would be bound may be a factor in determining procedural unconscionability. (See, e.g., Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 721 [employer’s arbitration agreement incorporated “arbitration rules that were not attached and require[d] the other party to go to another source in order to learn the full ramifications of the arbitration agreement”]; Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1406-1407 [“inability to receive full relief is artfully hidden by merely referencing the Better Business Bureau arbitration rules, and not attaching those rules to the contract,” forcing the customer to go to another source to learn the rules]; Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 89 [plaintiff “never given or shown a copy of the arbitration rules of the American Arbitration Association (AAA), the designated arbitration provider”]; Triveldi, 189 Cal.App.4th at 393 [plaintiff never given or shown a copy of the AAA rules]; Patterson v. ITT Consumer Financial Corp. (1993) 14 Cal.App.4th 1659, 1665 [“borrowers were not given a copy of the procedural rules of the National Arbitration Forum (NAF); the rules were sent to the borrowers only once ITT had initiated a claim against them”].) Failure to provide an explanation of the agreement in a language the employee can understand may also be a factor in determining procedural unconscionability. (See, e.g., Samaniego v. Empire Today LLC (2012) 205 Cal.App.4th 1138, 1145-1146.)

Plaintiffs argue that the agreement is substantively unconscionable because it lacks mutuality. (See Armendariz, 24 Cal.App.4th at 117-118.) An agreement may lack mutuality where it permits one party to seek relief through the courts, but does not allow the same relief for the other party. (See, e.g., Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 115; Trivedi, 189 Cal.App.4th at 396.) The agreement provides that claims primarily brought by patients, such as those for medical malpractice, claims arising from the provision of services by defendant, claims as to the admission agreement, elder abuse claims, unfair competition claims, and claims under the CLRA, are to be arbitrated. (See Def. Exh. A.) The agreement excludes claims relating to disputes over payments or the payment of the patient’s “share of costs” required by Medi-Cal – claims which would primarily be brought by defendants. (Ibid.)

In its Reply, Vernon argues that the Agreement requires both sides to be bound by arbitration. According to Vernon, plaintiffs claim that “the arbitration agreement can be read as only truly creating an obligation on the part of the resident to submit claims to arbitration. This is a claim not supported by even a cursory reading of the arbitration agreement. If there is a dispute over care, according to the AA both sides must arbitrate, which is an equal obligation.” (Reply, p. 9:7-9.) That is exactly the problem: the only party that is going to bring a “dispute over care” is the patient. It is virtually inconceivable that Vernon would sue its patient regarding a dispute over care.

For all of the above reasons, defendant’s petition to compel arbitration is DENIED.

Case Number: BC517527