Case Number: BC632943 Hearing Date: April 06, 2018 Dept: J

Re: Bettie McKinley, et al. v. Country Villa Claremont Healthcare Center, et al. (BC632943)

PETITION TO COMPEL CONTRACTUAL ARBITRATION AND MOTION TO STAY

Moving Party: Defendant The Orange County, Inc. dba Kindred Hospital Ontario

Respondents: Plaintiffs Bettie McKinley, et al.

POS: Moving OK; Opposing OK; Reply OK

The complaint herein, filed 9/6/16, asserts causes of action against Defendants Country Villa Claremont Healthcare Center, Kindred Hospital—Ontario and Does 1-50 for:

1. Elder Abuse/Neglect

2. Professional Negligence

3. Violation of Patient’s Rights

4. Wrongful Death

On 12/22/17, this matter was transferred from Department 93 (personal injury hub) to this department. A Status Hearing is set for 4/6/18.

Defendant The Orange County, Inc. dba Kindred Hospital Ontario (“Kindred Ontario”) petitions the court, per the Federal Arbitration Act (“FAA”) and CCP §§ 1281, 1281.2, and 1295, for an order compelling Plaintiffs Bettie McKinley, Gloria Smith, Edward Montgomery, Charles Montgomery, Carol Montgomery and Sheila Montgomery, individually and as successors-in-interest to Charles Montgomery (“plaintiffs”) to submit their claims against Kindred Ontario to binding arbitration in accordance with the Voluntary Alternative Dispute Resolution (ADR) Agreement. Kindred Ontario seeks a stay of this case as between it and plaintiffs until the completion of the arbitration process, per 9 U.S.C. § 3 and CCP § 1281.4.

EVIDENTIARY OBJECTIONS:

At the outset, plaintiffs’ evidentiary objections are overruled as “speaking” objections.

Kindred Ontario’s objections to the Declaration of Anthony D. Ghecea are ruled on as follows:

1-2. Sustained

“A written provision in…a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract…shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Moreover, “[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition [the court]…for an order directing that… arbitration proceed in the manner provided for in such agreement.” 9 U.S.C. § 4.

“Section 2 is a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. The effect of the section is to create a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.” Moses H. Cone Memorial Hospital v. Mercury Construction Corp. (1983) 460 U.S. 1, 24.

“The United States Supreme Court has broadly interpreted the phrase ‘involving commerce’ in title 9 United States Code section 2 as the functional equivalent of ‘affecting’ commerce. (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S. 265, 273-274; accord Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56). The Federal Arbitration Act’s reach is expansive and coincides with that of the commerce clause. (Allied-Bruce, supra, at p. 274; Perry v. Thomas (1987) 482 U.S. 483, 490). In Allied-Bruce, the high court expounded on the reach of the commerce language in title 9 United States Code section 2 as follows: ‘The initial interpretive question focuses upon the words “involving commerce.” These words are broader than the often-found words of art “in commerce.” They therefore cover more than “’only persons or activities within the flow of interstate commerce.’” United States v. American Building Maintenance Industries (1975) 422 U.S. 271, 276 (quoting Gulf Oil Corp. v. Copp Paving Co. (1974) 419 U.S. 186, 195 (defining “in commerce” as related to the “flow” and defining the “flow” to include “the generation of goods and services for interstate markets and their transport and distribution to the consumer”);…).’ (Allied-Bruce, supra, at p. 273; see Cole v. Burns Internat. Security Services (D.C. Cir. 1997) 105 F.3d 1465, 1471). The use of the terminology ‘involving commerce’ evidences the broadest possible exercise of the commerce clause power by the Congress. (Alafabco, supra, 539 U.S. at p. 56; Shepard v. Edward Mackay Enterprises, Inc. (2007) 148 Cal.App.4th 1092, 1097).” Scott v. Yoho (2016) 248 Cal.App.4th 392, 400.

The FAA governs here. Defendant regularly orders, receives and utilizes goods and supplies, such as medications, medical supplies, beds, linens, laundry supplies, and cleaning chemicals, from outside the State of California (Trac Decl., ¶ 4). Additionally, defendant receives reimbursement from out-of-state insurance companies, Medicare and/or Medicaid for the care and treatment rendered to its patients, and provides care to out-of-state patients. (Id., ¶ 5).

Once the court concludes that an arbitration agreement falls within the scope of the FAA, it must determine whether the agreement is valid based on general state law principles regarding contract formation, revocation, and enforcement. “Code of Civil Procedure section 1280 et seq. provides a procedure for the summary determination of whether a valid agreement to arbitrate exists, and such summary procedure satisfies both state and federal law…Under this procedure, the petitioner bears the burden of establishing the existence of a valid agreement to arbitrate, and a party opposing the petition bears the burden of proving a preponderance of the evidence any fact necessary to its defense…[a] decision on such issues with respect to a contract governed by the FAA must be made with due regard to the federal policy favoring arbitration. (City of Vista v. Sutro & Co. (1997) 52 Cal.App.4th 401, 407). However, even if one of the parties contends that the FAA applies to their agreement to arbitrate, the FAA does not apply until the existence of an enforceable arbitration agreement is established under state law principles involving formation, revocation and enforcement of contracts generally. (Cione v. Foresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, 634).” Banner Entertainment, Inc. v. Superior Court (Alchemy Filmworks, Inc.) (1998) 62 Cal.App.4th 348, 356-357.

Defendant has not met its burden of proving the existence of an arbitration agreement. “Generally, a person who is not a party to an arbitration agreement is not bound by it. However, there are exceptions. For example, a patient who signs an arbitration agreement at a health care facility can bind relatives who present claims arising from the patient’s treatment. Further, a person who is authorized to act as the patient’s agent can bind the patient to an arbitration agreement.” Flores v. Evergreen At San Diego, LLC (2007) 148 Cal.App.4th 581, 587 (internal citations omitted; emphasis theirs).

On 12/21/15, Bettie McKinley (“Bettie”) executed a “Voluntary Alternative Dispute Resolution (ADR) Agreement” (“Agreement”). (Robinson Decl., ¶ 8, Notice of Lodgment, Exhibit “1”). Plaintiffs assert that she was not authorized to do so on behalf of her father, Charles Montgomery (“decedent”). Indeed, there was no written instrument conferring agency power on Bettie. (And the purported power of attorney in favor of
Carol A. Montgomery or Charles L. Montgomery Jr. states on its face, “THIS FORM
IS NOT VALID FOR HEALTH CARE DECISIONS”) Further, although Bettie signed the Agreement on the signature line for the “patient,” she notably did not sign the signature line for the separate clause stating that “[b]y virtue of the Patient’s consent, instruction and/or durable power of attorney, I hereby certify that I am authorized to act as Patient’s agent in executing and delivering of this Agreement. If signed by a Legal Representative, the representative certifies that the Facility may reasonably rely upon the validity and authority of the representative’s signature based upon actual, implied or apparent authority to execute this Agreement as granted by the patient.”

Admittedly, “[e]ven when there is no written agency authorization, an agency relationship may arise by oral consent or by implication from the conduct of the parties. However, an agency cannot be created by the conduct of the agent alone; rather, conduct by the principal is essential to create the agency.” Flores, supra, 148 Cal.App.4th at 587-588 (emphasis theirs). In Pagarigan v. Libby Care Center, Inc. (2005) 99 Cal.App.4th 298, the Second District Court of Appeal affirmed the trial court’s order denying defendant’s petition to compel arbitration of plaintiffs’ claims under circumstances where plaintiffs, the patient’s daughters, had signed arbitration agreements on the patient’s behalf approximately a week after her admission. In that case, the patient had been admitted in a comatose state and there was no evidence that the patient had signed a durable power of attorney or had ever employed either of her daughters as her agent in any capacity. The Court of Appeal also rejected defendants’ contention that plaintiffs had authority to bind the patient to an arbitration agreement merely by being the patient’s next of kin. Likewise, defendant here provides no evidence suggesting that decedent allowed it to believe that Bettie had authority to act for him.

Additionally, in Flores, supra, 148 Cal.App.4th 581, the Fourth District Court of Appeal affirmed the trial court’s order denying defendant facility’s motion to compel arbitration agreements signed by plaintiff patient’s husband, on the basis that the husband did not have authority to bind plaintiff patient to same. In that case, patient plaintiff’s husband had also signed various admission documents. Patient plaintiff’s husband, however, did not have power of attorney over patient plaintiff at the time of her admission, but acquired same months later. The Court of Appeal rejected defendant’s argument that simply by virtue of being patient plaintiff’s spouse, husband was patient plaintiff’s “agent,” with authority to bind her to arbitration, stating that “an agency cannot be implied from the marriage relation alone.” Id. at 589 (internal citation omitted). The Court of Appeal further rejected defendant’s contention that a resident’s next-of-kin impliedly had authority to sign arbitration agreements because the Legislature has authorized them to make admission decisions on behalf of mentally incompetent family members, even in the absence of a power of attorney:

“As with medical decisions, admission of a mentally incompetent patient to a nursing home is sometimes necessary even when there is no person with recognized legal authority to act on behalf of the patient. However, we cannot conclude the Legislature intended to include the arbitration decision as among the matters that may be decided by next of kin when signing a nursing home admission contract. In Pagarigan, the court held that although next of kin of a mentally incompetent patient were statutorily defined as persons authorized to make medical decisions and to exercise the patient’s rights at the facility, this authority did not ‘translate[ ] into authority to sign an arbitration agreement on the patient’s behalf at the request of the nursing home.’ (Pagarigan, supra, 99 Cal.App.4th at p. 302; see also Goliger v. AMS Properties, Inc. (2004) 123 Cal.App.4th 374, 377 [mentally competent mother’s conduct of allowing daughter to make health care decisions did not justify expanding daughter’s powers to include arbitration decision].) Absent a legislative directive to the contrary, we agree with this holding in Pagarigan and find it equally applicable to spouses.

“Even though the Legislature has extensively regulated the issue of arbitration in nursing home contracts, and in other contexts has specified that next of kin may make significant decisions for mentally incompetent patients, it has failed to specify that next of kin have authority to agree to arbitration. Unlike admission decisions and medical care decisions, the decision whether to agree to an arbitration provision in a nursing home contract is not a necessary decision that must be made to preserve a person’s well-being.” Id. at 593-594.

The fact that Bettie may have signed various documents in connection with decedent’s admission is meaningless, absent actual written authority, oral consent from decedent, or evidence suggesting that decedent allowed defendant to believe that Bettie had authority to act for him.

Defendant argues that decedent is nonetheless “bound” to the Agreement on the basis that he is a “third-party beneficiary.” However, decedent cannot have been a third-party beneficiary if no valid arbitration agreement existed. Defendant further argues that “if this Court were to find that the ADR Agreement is unenforceable because it was executed by Bettie McKinley rather than by Decedent, the Court must also find that the Admission Agreement is unenforceable because it, too, was executed by Bettie McKinley rather than by Decedent,” a position it claims would result in “no duty of care” being owed to decedent. (Motion, 13:20-25). Not so, as per Pagarigan and Flores.

Finally, defendant’s “delegation clause” argument is irrelevant, as it pertains to the issue of enforceability. Again, defendant has not met its burden of proving the existence of an arbitration agreement.

Accordingly, the petition is denied.