Case Number: EC062440    Hearing Date: August 22, 2014    Dept: A

Stassi v Sunrise Senior Living Management

PETITION TO COMPEL ARBITRATION

Calendar: 13
Case No: EC062440
Date: 11/22/14

MP: Defendant, Sunrise Senior Living Management, Inc. and AL US/San Gabriel Senior Housing LP
RP: Plaintiff, Josephine Stassi

RELIEF REQUESTED:
Order compelling Plaintiff to submit her claims to arbitration.

DISCUSSION:
This case arises from the Plaintiff’s claim that the Defendants engaged in elder abuse when it provided care to her.
Trial is set for November 10, 2014 in light of the Court having granted the Plaintiff’s motion for a preference.

This hearing concerns the Defendants’ motion for an order to compel arbitration of the Plaintiff’s claims. CCP section 1281.2 permits a party to petition the Court to order the parties to arbitrate a controversy when the Court finds that a written agreement to arbitrate the controversy exists, unless the Court determines that one of the following circumstances exist:

1) the right to compel arbitration has been waived by the petitioner
2) grounds exist for the revocation of the agreement.
3) a party to the arbitration agreement is also a party to a pending court action 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.

The Defendants’ motion provides evidence that there was a written arbitration agreement in the Residency Agreement under which the Plaintiff obtained care and services from the Defendants. A copy of the Residency Agreement is attached as exhibit A. In Article VI, section X, the parties agreed that all claims and disputes arising out of the agreement or the residency, care, or services shall be resolved by submission to neutral, binding arbitration. A review of the complaint shows that its claims arise from and are related to the care and services that the Plaintiff received while a resident of the Defendants’ facility. Accordingly, the Court will find that the arbitration agreement applies to the claims in the Plaintiff’s complaint.

The Plaintiff argues that the Court should not enforce the agreement because of the following:

1) the Defendants waived the right to compel arbitration; and
2) the agreement is unconscionable.

1. Waiver
No single test identifies the nature of the conduct that will constitute a waiver of arbitration. St. Agnes Medical Center v. PacifiCare of California (2003) 31 Cal. 4th 1187, 1195-1196. In determining waiver, a Court can consider the following:

1) whether the party’s actions are inconsistent with the right to arbitrate;
2) whether “the litigation machinery has been substantially invoked” and the parties “were well into preparation of a lawsuit” before the party notified the opposing party of an intent to arbitrate;
3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay;
4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings;
5) “whether important intervening steps had taken place”; and
6) whether the delay “affected, misled, or prejudiced” the opposing party.
Id.

Generally, the determination of waiver is a question of fact, and the trial court’s finding, if supported by substantial evidence, is binding on the appellate court. Id.
The Plaintiff argues that the waiver occurred based on the following conduct:

1) the Defendants attacked the pleadings by serving a demurrer and motion to strike in which the Defendants did not assert the right to arbitration;
2) the Defendants did not raise the right to arbitration during the parties’ discussions related to discovery; and
3) the Defendants did not raise the right to arbitration in opposition to the Plaintiff’s motion for a preference in setting trial.

The Defendants’ decision to file a demurrer and a motion to strike and the Defendants’ involvement in discovery are actions that are inconsistent with the right to arbitrate. A review of the Defendants’ demurrer, motion to strike, and opposition to the Plaintiff’s motion for a preference reveals no assertion that the right to arbitration was not waived. Further, the Defendants’ failure to assert the right to arbitration promptly and diligently in this case caused prejudice to the Plaintiff when the Plaintiff spent resources opposing the Defendants’ motions, filing her own motion, and engaging in discovery

Further, on July 11, 2014, the Court granted a preference to the Plaintiff based on a finding that her health was such that a prejudice was necessary to avoid prejudice. The Court granted this motion based on the following evidence in the declaration of the Plaintiff’s physician, Dr. Victor Contreras:

1) the Plaintiff is an 84 year old female with a history of hypertension, diabetes, morbid obesity, and coronary artery disease;
2) the Plaintiff has been plagued by generalized weakness to the point where she is bedridden and dependent on others to complete her activities of daily living;
3) during her examination, the Plaintiff has an elevated blood pressure of 160/100 and a pulse rate of 102 per minute;
4) the Plaintiff is incontinent of bowel and bladder and has suffered from recurrent urinary tract infects that require hospitalization;
5) the Plaintiff has congestive heart failure; and
6) the Plaintiff suffers from multi-joint severe degenerative arthritis.
7) the Plaintiff has a weakened gag reflex, which places her at a heightened risk for aspiration pneumonia, which can lead to sepsis and death;
8) the Plaintiff displayed bibasilar crackles, which indicates fluid accumulation in her lungs;
9) the Plaintiff’s abdomen is obese and she wears a diaper to meet her toileting needs;
10) the Plaintiff has limited range of motion of all extremities and shows pitting edema in both lower extremities;
11) due to her bedridden status, compromised circulation, and sedentary status, the Plaintiff is at risk for skin breakdown and deep vein thrombosis; and
12) the Plaintiff’s cardiovascular status includes uncontrolled hypertension, tachycardia, pulmonary congestion, and pedal edema.

The Court’s order granting a preference under CCP section 36 was an act that substantially invoked the “litigation machinery” because it set the matter for trial. Further, this was an important intervening step in the litigation because it required the Plaintiff’s case to be heard within 120 days.
In addition to being an important intervening step in the litigation, the order granting the preference creates a situation in which there are grounds to deny the use of arbitration. The purpose of CCP section 36 is to protect a legislatively acknowledged substantive right of older litigants to trial and to obtain a full measure of damages during the litigant’s lifetime. Vinokur v. Superior Court (1988) 198 Cal. App. 3d 500, 502. As a matter of statutory construction the provision must be deemed to be mandatory and absolute in its application. Id. The Court found “there can be no inroads into the mandate of section 36, hence the filing of a motion for preference by a qualified litigant creates a situation in which the use of arbitration is not possible.” (italics added for emphasis) Id.
In Vinokur, the trial court had denied a motion for preference and referred the matter to judicial arbitration. The Court of Appeal issued a writ of mandate that required the trial court to grant the motion for a trial preference because the trial preference statute controlled over the arbitration statute.
The Court’s decision was based balancing the interests of a statute enacted in order to ensure that senior litigants do not lose the right to have their cases litigated because of delays in setting trial dates and another statute intended principally as a device for easing a growing burden on our courts and to be encouraged or required “whenever possible.” The Court found that section 36 is “unquestionably the controlling authority” and that the competing interest of the arbitration statute must yield in order to ensure older litigants have their day in court. Id.
This reasoning applies in the pending case to demonstrate that “the litigation machinery has been substantially invoked” and that an important intervening step has occurred. The Court’s order granting the preference advances the interest of ensuring that a senior litigant does not lose her right to have her case litigated due to her health. The Defendant’s failure to act diligently and invoke the right to arbitration resulted in the Court issuing an order for a preference. This is further grounds to find a waiver of the right to compel arbitration.

Therefore, the Court will deny the motion to compel arbitration because the Defendants waived the right based on the following:

1) the Defendants acting inconsistently with the right to arbitrate and caused prejudice to the Plaintiff by filing papers with the Court and discussing discovery without asserting the right to arbitrate; and
2) the Court order granting a preference under CCP section 36 indicates that the litigation machinery was substantially invoked and that an important intervening step had occurred in this case.

2. Unconscionable Agreement
The Plaintiff also argues that the arbitration agreement should not be enforced because it is unconscionable. Unconscionability is a valid reason for refusing to enforce an arbitration agreement under CCP section 1281 because it is a reason for refusing to enforce contracts generally. Armendariz v. Found. Health Psychcare Servs. (2000) 24 Cal. 4th 83, 113 to 127.
A contract will be found to be unconscionable when: (1) it is adhesive, in that all or part of the contract falls outside the reasonable expectations of the weaker party; and (2) equitably, the terms unreasonably favor the other party. Stirlen v. Supercuts (1997) 51 Cal.App.4th 1519, 1530-1533. Unconscionability has both a “procedural” and a “substantive” element.
Procedural unconscionability has to do with matters relating to freedom of assent. Id. The procedural element focuses on two factors: oppression and surprise. Id. “Oppression” arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice. Id. “Surprise” involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in the printed form drafted by the party seeking to enforce the disputed terms. Id.
Substantive unconscionability considers whether the agreement reallocates the risks of the bargain in an objectively unreasonable or unexpected manner. Id. Substantive unconscionability involves the imposition of harsh or oppressive terms on one who has assented freely to them. Id.
Both procedural and substantive elements must be present in order for a Court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. Id. They need not be present in the same degree. Id. The Courts invoke a sliding scale which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves, i.e., the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa. Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 114.

The Plaintiff argues that the arbitration agreement includes procedurally unconscionable elements because the Defendant did not advise him that he was signing an arbitration agreement, it was a take-it-or-leave-it agreement, and the Plaintiff was surprised at the requirement to arbitrate. In addition, the Plaintiff argues that the agreement has substantively unconscionable elements because it requires only the Plaintiff to arbitrate, it requires the arbitrator to determine whether a dispute is subject to arbitration, and it requires the Plaintiff to pay a portion of the arbitration costs.

a. Procedural Unconscionability
The Plaintiff argues that there is procedural unconscionability because the contract was a contract of adhesion. A “contract of adhesion” is a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. Stirlen v. Supercuts, Inc. (1997) 51 Cal. App. 4th 1519, 1533.
The Plaintiff provides facts in the declaration of Josephine Vinci, who is the attorney in fact for the Plaintiff who signed the residence agreement. Ms. Vinci states in paragraph 5 that no one for the Defendant explained the arbitration clause or stated that the arbitration clause in the document was not a requirement for admission. Ms. Vinci also states that she felt that if she did not sign the document in its entirety, the Plaintiff’s admission would be refused.
Further, a review of the residency agreement in exhibit A to the moving papers reveals that it is a standardized, form contract. There are no provisions that indicate that the arbitration agreement in section X on page 17 is optional.
This is evidence that there was some procedural unconscionability in that the Defendants had imposed the terms of a standardized agreement on the Plaintiff, whose attorney-in-fact had only the opportunity to adhere to the residence agreement or to reject it.

Therefore, the Court will find that there is some evidence of procedural unconscionability because the agreement was a contract of adhesion.

b. Substantive Unconscionability
The Plaintiff argues that the agreement has substantively unconscionable elements because the arbitration provision violates the statutory requirements for residency agreement.
Health and Safety Code section 1599.60 to 1599.84 address the legal requirements of the contracts to be used on admission of an individual to a long-term health care facility.
Hogan v. Country Villa Health Services (2007) 148 Cal. App. 4th 259, 267. Under Health and Safety Code section 1599.81:

a) All contracts of admission that contain an arbitration clause shall clearly indicate that agreement to arbitration is not a precondition for medical treatment or for admission to the facility.
b) All arbitration clauses shall be included on a form separate from the rest of the admission contract. This attachment shall contain space for the signature of any applicant who agrees to arbitration of disputes.
c) On the attachments, clauses referring to arbitration of medical malpractice claims, as provided for under Section 1295 of the Code of Civil Procedure, shall be clearly separated from other arbitration clauses, and separate signatures shall be required for each clause.
d) In the event the contract contains an arbitration clause, the contract attachment pertaining to arbitration shall contain notice that under Section 1430, the patient may not waive his or her ability to sue for violation of the Patient’s Bill of Rights.

A review of the arbitration agreement reveals that it violates Health and Safety Code section 1599.81. The contract does not clearly indicate that the agreement to arbitrate is not a precondition for admission. The arbitration clause is not included on a separate form. The contract does not contain a notice that the patient is not required to waive the ability to sue for violation of the Patient’s Bill of Rights.
This indicates that the arbitration agreement violates express, statutory requirements for agreements to be used for the admission of individuals to long-term health care facilities. Accordingly, the Defendants’ failure to draft an agreement that complies with Health and Safety Code section 1599.81 is substantial evidence that the arbitration agreement is substantively unconscionable.

Therefore, there are grounds to refuse to enforce the arbitration agreement because it is unconscionable.

3. Grounds Exist for the Revocation of the Agreement
Finally, the failure of the Defendants to draft an agreement that complies with Health and Safety Code section 1599.81 indicates that there are grounds to revoke the arbitration agreement. Under CCP section 1281.2, the Court may refuse to order the parties to submit a dispute to arbitration when the Court finds that there are grounds to revoke the arbitration agreement.
Here, as noted above, the arbitration agreement at issue does not clearly indicate that the agreement to arbitrate is not a precondition for admission, is not included on a separate form, and does not contain a notice that the patient is not required to waive the ability to sue for violation of the Patient’s Bill of Rights, all of which are requirements of Health and Safety Code section 1599.81 for arbitration agreements in contracts to be used on admission of an individual to a long-term health care facility. Since the arbitration agreement does not comply with the express statutory requirements for arbitration agreements related to the residency agreement at issue, there are grounds to revoke the arbitration agreement and refuse to enforce it.

Therefore, the Court will deny the Defendants’ motion to compel arbitration on the following grounds:

1) the Defendants waived the right to compel arbitration;
2) the arbitration agreement is unconscionable; and
3) there are grounds to revoke the arbitration agreement because it does not comply with Health and Safety Code section 1599.81.

RULING:
Deny Defendants’ motion