Case Title: Berglund v. Arthroscopic & Laser Surgery

Citation: 44 Cal. 4th 528 original opinion

Docket Number: S144813

State: california

Court: California Supreme Court

Date: 2008-07-17T00:00:00Z

Document:
1
Filed 7/17/08 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
DANIEL L. BERGLUND, 
) 
 
 
) 
 
Plaintiff and Respondent, 
) 
 
 
) 
S144813 
 
v. 
) 
 
 
) 
Ct.App. 4/1 D045218 
ARTHROSCOPIC & LASER SURGERY ) 
CENTER OF SAN DIEGO, L.P., 
) 
 
) 
San Diego County 
 
Defendant and Appellant. 
) 
Super. Ct. No. GIC753465 
___________________________________ ) 
 
 
Must a discovery dispute involving a nonparty to an arbitration proceeding 
be submitted first to the arbitrator?  If so, what is the scope of judicial review of an 
arbitrator’s order compelling a nonparty to the arbitration to comply with a party’s 
discovery subpoena?  We conclude, as the Court of Appeal did, that the dispute 
must be submitted first to the arbitral, not the judicial, forum; and that the 
nonparty is entitled to full judicial review of the arbitrator’s discovery order. 
I 
 
On August 23, 2000, Daniel L. Berglund filed a complaint in the San Diego 
Superior Court for battery, breach of fiduciary duty, and negligence based on 
medical care and treatment he received.  Plaintiff alleged, among other things, that 
one of his treating physicians was impaired by his abuse of narcotics at the time he 
treated plaintiff.  Named as defendants were a number of physicians and 
organizations that had provided plaintiff with medical care, including Arthroscopic 
& Laser Surgery Center of San Diego, L.P. (ALSC). 
 
 2
 
Berglund served on ALSC a subpoena requesting the production of certain 
documents, including medication logs pertaining to “missing medications, 
prescriptions and/or other chemical substances” for the period 1997 to 1999.  
ALSC objected on the ground that the documents were statutorily privileged.  
(Evid. Code, § 1157; Health & Saf. Code, § 1370.) 
 
In February 2001, the superior court granted a motion by defendants other 
than ALSC to compel contractual arbitration, and a retired judge became the 
arbitrator.  Because ALSC was not a party to any arbitration agreement, 
Berglund’s case against it was not subject to arbitration and remained pending in 
the superior court. 
In June 2001, Berglund filed in the superior court a motion to compel 
production of the requested documents.  On July 23, 2001, the court denied the 
motion to compel production, ruling that, as ALSC had asserted, the documents 
were statutorily privileged.  After Berglund filed a first amended complaint against 
ALSC, Berglund and ALSC settled the court action.  In October 2003, the superior 
court approved the settlement as having been entered in good faith.  (Code Civ. 
Proc., § 877.6, subd. (c).)1  The court then dismissed with prejudice Berglund’s 
complaint against ALSC. 
 
In July 2004, in the arbitration proceeding, Berglund served on ALSC, a 
nonparty to the arbitration, a discovery subpoena for the production of ALSC’s 
“documents reflecting inventory lists of Narcotic medications which were 
discovered missing during the period of time from 1996 to January of 2000.”  
ALSC asserted that the documents were privileged and on August 9 it sought a 
protective order in the superior court to preclude Berglund from obtaining the 
                                              
1 
All further statutory references are to the Code of Civil Procedure. 
 
 3
documents he had sought to discover at the arbitration proceeding, to which ALSC 
was not a party. 
 
Thereafter, Berglund filed with the arbitrator a motion to compel 
production of the documents.  On September 23, 2004, the arbitrator concluded 
that he had jurisdiction to rule on the motion, and he directed ALSC to produce the 
requested documents for the arbitrator’s in camera review. 
 
On October 7, 2004, the superior court denied ALSC’s August 9 motion 
for a protective order.  The court ruled that the arbitrator, not the court, had 
jurisdiction over Berglund’s discovery subpoena and thus was empowered to 
compel, as the arbitrator had done, production of the subpoenaed documents.  
ALSC then filed in the superior court a notice of appeal, and it filed in the Court of 
Appeal a motion for a stay, or alternatively a petition for writ of supersedeas, 
prohibition, or other appropriate relief.  The Court of Appeal denied the request 
for a stay and it denied the writ petition, but it allowed ALSC’s appeal to proceed 
with respect to the superior court’s order denying ALSC’s motion for a protective 
order.  A divided Court of Appeal panel reversed and remanded the matter for 
further proceedings. 
 
The lead opinion of the three-justice panel of the Court of Appeal held in 
part I that an arbitrator has statutory authority to enforce discovery subpoenas 
against a nonparty in personal injury cases (§ 1283.05, subd. (b)), and that 
therefore the arbitration proceeding is the proper forum for a nonparty to challenge 
the discovery sought by a party to the arbitration.  In part II, the lead opinion held 
that the limitations on judicial review of arbitration decisions involving parties to 
the arbitration are not applicable to an arbitrator’s discovery orders against 
nonparties.  To hold otherwise, the lead opinion reasoned, would be a radical 
departure from the principle that persons or entities cannot be forced to arbitrate 
controversies that they have not agreed to arbitrate.  (See Freeman v. State Farm 
 
 4
Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 481; Marsch v. Williams (1994) 23 
Cal.App.4th 250, 255.)  It stated that “[i]n the absence of an express and 
unambiguous provision in the statute, it is difficult to conclude the Legislature 
intended to deny nonparties full judicial review of an arbitrator’s discovery 
orders.”  (Italics added.)  One justice agreed with the lead opinion’s holding in part 
I of the opinion but not with its holding in part II.  The other justice concurred in 
the lead opinion’s holding in part II but did not join its holding in part I.  We 
granted Berglund’s petition for review to decide whether an arbitrator’s discovery 
order against a nonparty is subject to full judicial review. 
II 
 
Generally, an arbitrator’s decision in a dispute between parties to an 
arbitration agreement is subject to only limited judicial review.  This is why:  An 
“arbitration decision is final and conclusive because the parties have agreed that it 
be so.”  (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10.)  Arbitration by 
agreement is often a “process in which parties voluntarily trade the safeguards and 
formalities of court litigation for an expeditious, sometimes roughshod means of 
resolving their dispute.”  (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 
831.)  Because “arbitral finality is a core component of the parties’ agreement to 
submit to arbitration” (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 10) and 
because arbitrators are not required to make decisions according to the rule of law, 
parties to an arbitration agreement accept the risk of arbitrator errors (id. at p. 12), 
and arbitrator decisions cannot be judicially reviewed for errors of fact or law even 
if the error is apparent and causes substantial injustice (id. at pp. 11, 33; see 
Vandenberg v. Superior Court, supra, 21 Cal.4th at p. 832).  “ ‘As a consequence, 
 
 5
arbitration awards are generally immune from judicial review.’ ”  (Moncharsh v. 
Heily & Blase, supra, 3 Cal.4th at p. 11.)2 
 
Discovery in arbitration is generally limited.  (Alexander v. Blue Cross of 
California (2001) 88 Cal.App.4th 1082, 1088; Coast Plaza Doctors Hospital v. 
Blue Cross of California (2000) 83 Cal.App.4th 677, 690.)  Sections 1283.1 and 
1283.05, however, grant arbitrators authority over discovery in certain arbitration 
proceedings.  Section 1283.1’s subdivision (a) provides that section 1283.05 is 
incorporated into and made a part of every agreement to arbitrate any dispute 
arising out of a claim for wrongful death or for personal injury.   
 
As pertinent here, section 1283.05’s subdivision (a) states that after the 
appointment of an arbitrator, the parties to the arbitration have the same rights to 
take depositions and obtain discovery and to “exercise all of the same rights, 
remedies, and procedures, and be subject to all of the same duties, liabilities, and 
obligations in the arbitration . . . as provided in” the statutory provisions governing 
subpoenas (§§ 1985-1997) and in the Civil Discovery Act (§ 2016.010 et seq.) “as 
if the subject matter of the arbitration were pending before a superior court of this 
state in a civil action . . . .”  Thus, parties to arbitration have a right to discovery.  
                                              
2  
The authority of the courts to vacate an arbitration award is limited by 
statute.  Courts may vacate an award when (1) the award was procured by 
corruption, fraud, or other undue means; (2) an arbitrator was corrupt; 
(3) misconduct of the arbitrator substantially prejudiced a party’s rights; (4) the 
arbitrator exceeded his or her powers; (5) an arbitrator’s refusal to postpone the 
hearing or hear material evidence substantially prejudiced the rights of a party; or 
(6) an arbitrator failed to disclose a ground for disqualification or improperly 
failed to disqualify himself or herself.  (§ 1286.2, subd. (a).)  With respect to 
arbitrations involving unwaivable statutory rights, they are subject to judicial 
review “ ‘sufficient to ensure that arbitrators comply with the requirements of the 
statute’ at issue.”  (Armendariz v. Foundation Health Psychcare Services, Inc. 
(2000) 24 Cal.4th 83, 106.)  None of these situations is present here. 
 
 6
And because section 1283.05’s subdivision (a) incorporates the Civil Discovery 
Act and that law permits discovery from nonparties (§ 2020.010 et seq.), the right 
to discovery includes discovery from nonparties. 
 
Section 1283.05’s subdivision (b) grants arbitrators the power to enforce 
discovery through sanctions “as can be or may be imposed in like circumstances in 
a civil action by a superior court of this state under the provisions of [the Code of 
Civil Procedure], except the power to order the arrest or imprisonment of a 
person.”  Thus, in an arbitration proceeding the arbitrator’s power to enforce 
discovery resembles that of a judge in a civil action in superior court (Alexander v. 
Blue Cross of California, supra, 88 Cal.App.4th at p. 1090), including the 
authority to enforce discovery against nonparties through imposition of sanctions 
(§ 2023.030). 
 
Section 1283.05’s subdivision (c) grants arbitrators the power to issue 
discovery orders imposing “terms, conditions, consequences, liabilities, sanctions, 
and penalties,” and it states that “such orders shall be as conclusive, final, and 
enforceable as an arbitration award on the merits, if the making of any such order 
that is equivalent to an award or correction of an award is subject to the same 
conditions, if any, as are applicable to the making of an award or correction of an 
award.”  (Italics added.)  
 
We agree with the Court of Appeal majority that all discovery disputes 
arising out of arbitration must be submitted first to the arbitral, not the judicial 
forum.  That conclusion follows logically from section 1283.05, which grants 
parties to an arbitration proceeding the right to discovery, including discovery 
from nonparties; authorizes arbitrators to order discovery; and expressly gives 
arbitrators the power to enforce discovery rights and obligations.  Because the 
Legislature granted arbitrators the authority to order a nonparty to an arbitration 
proceeding to provide discovery to a party and granted arbitrators the power to 
 
 7
enforce discovery, it is reasonable to infer that the Legislature intended discovery 
disputes arising out of arbitration to be initially litigated before the arbitrator.  
 
Earlier, we mentioned that existing law provides for only limited judicial 
review of an arbitration decision against a party.  (See pp. 4-5 & fn. 2, ante.)  
According to Berglund, such limited judicial review also applies to an arbitrator’s 
discovery order against a nonparty, as ALSC is here.  In support, Berglund cites 
section 1283.05.  But subdivisions (a) and (b) of that statute say nothing about the 
scope of judicial review of an arbitrator’s discovery decision against a nonparty.  
Nor, as we shall explain, does the language of subdivision (c) lend support to 
Berglund’s view.   
 
That provision states in pertinent part that an arbitrator’s discovery order is 
“as conclusive, final, and enforceable as an arbitration award on the merits.”  
(§ 1283.05, subd. (c), italics added.)  In this way, the statute links arbitrator 
discovery orders to arbitration awards — making arbitrator discovery orders 
neither more nor less conclusive, final, and enforceable than arbitration awards on 
the merits.  Because the existence and scope of judicial review affects the finality 
and conclusiveness of an order or decision, we construe this language as making 
arbitration awards subject to judicial review that is neither more nor less limited 
than judicial review of arbitration awards.  Accordingly, we proceed with our 
analysis by examining the scope of judicial review of arbitration awards as to both 
parties and nonparties. 
 
As discussed on pages 4 and 5, ante, judicial review of arbitration awards 
as to parties is limited.  Therefore, unless the arbitrator’s award falls into one of 
the few applicable exceptions (see ante, at p. 5, fn. 2), the arbitrator’s award is 
conclusive and final as to the parties.  But does that finality extend to nonparties?  
The answer is “no,” because without consent a nonparty to an arbitration 
agreement cannot be compelled to arbitrate a dispute.  (Buckner v. Tamarin (2002) 
 
 8
98 Cal.App.4th 140, 142; Benasra v. Marciano (2001) 92 Cal.App.4th 987, 990; 
Rhodes v. California Hospital Medical Center (1978) 76 Cal.App.3d 606, 609; see 
EEOC v. Waffle House, Inc. (2002) 534 U.S. 279, 294 [“It goes without saying 
that a contract cannot bind a nonparty”]; Vandenberg v. Superior Court, supra, 21 
Cal.4th at p. 831 [nonparties to arbitration award cannot invoke doctrine of 
collateral estoppel against parties to an arbitration award].) 
By linking arbitrator discovery orders to arbitration awards in section 
1283.05’s subdivision (c) — giving both the same degree of finality and thus, by 
implication, the same scope of judicial review — the Legislature has made the rule 
limiting judicial review of arbitration awards applicable as well to judicial review 
of arbitrator discovery orders.  But did the Legislature intend to make that rule 
applicable when judicial review is sought by a nonparty to the arbitration, or only 
when judicial review is sought by a party?  The pertinent language in subdivision 
(c) is susceptible of either interpretation. 
One way to construe the statutory language making an arbitrator’s 
discovery order “as conclusive, final, and enforceable as an arbitration award” 
(§ 1283.05, subd. (c)) is to impose on judicial review of an arbitrator discovery 
order, whether sought by a party or a nonparty, the same limitations that would 
apply to a party’s review of an arbitration award.  But that construction would 
violate the principle that nonparties to arbitration are not bound by an arbitrator’s 
decision because the arbitrator’s authority is derived from the parties’ consent and, 
as we explained earlier, nonparties have not consented to arbitration. 
The other way to construe that statutory language is to impose on judicial 
review of arbitrator discovery orders the limitations that would apply to a party’s 
review of an arbitration award only when a party seeks judicial review of the 
order, allowing nonparties to obtain full judicial review of arbitrator discovery 
orders made against them.  By requiring a more thorough and exacting judicial 
 
 9
review of arbitrator discovery orders against nonparties, that construction would 
impose greater burdens on judicial resources, but it would also provide greater 
protection of the legal rights of nonparties who, by definition, have not consented 
to arbitration.  As discussed at page 4, ante, arbitrators are not required to follow 
the law when resolving the parties’ disputes, and their decisions as to parties 
cannot be judicially reviewed for errors of fact or law.  Thus, giving arbitrator 
discovery orders the same deference normally given arbitration awards would 
substantially compromise the legal rights of nonparties against whom erroneous 
discovery orders may be made. 
To determine whether arbitrator discovery orders against nonparties are 
subject to full or only limited judicial review, we apply the rule of construction 
that when a statutory provision is susceptible of two alternative interpretations, the 
one that leads to the most reasonable result will be followed.  (People v. Shabazz 
(2006) 38 Cal.4th 55, 68.)  Here, construing section 1283.05’s subdivision (c) as 
allowing full judicial review of arbitrator discovery orders against nonparties leads 
to the most reasonable result because it preserves the legal rights of nonparties.   
 
That interpretation is also consistent “with our common practice of 
construing statutes, when reasonable, to avoid difficult constitutional questions.”  
(Le Francois v. Goel (2005) 35 Cal.4th 1094, 1105.)  As pointed out by ALSC, a 
nonparty to the arbitration proceeding here, a contrary conclusion would implicate 
the nonparty’s constitutional rights to due process of law (U.S. Const., 5th & 14 
Amends.; Cal. Const., art. I, § 7) because, as we noted earlier, the normal 
limitations on judicial review of arbitrator decision mean that arbitrators need not 
follow the law and, apart from some narrow exceptions, their errors are not subject 
to judicial review and correction.  Also, a statutory construction severely 
restricting a nonparty’s right to judicial review of an arbitrator’s discovery orders 
would raise serious separation-of-powers concerns insofar as it vested in a 
 
 10
nongovernmental body (the arbitrator), and removed from the judicial branch, the 
authority to determine the legal rights of a person who had never agreed, 
contractually or otherwise, to be bound by the nonjudicial body’s decisions.  (See 
McClung v. Employment Development Dept. (2004) 34 Cal.4th 467, 472 [“ ‘The 
judicial power is conferred upon the courts by the Constitution and, in the absence 
of a constitutional provision, cannot be exercised by any other body’ ”]; 
Department of Social Services v. Superior Court (1997) 58 Cal.App.4th 721, 738 
[judicial function is to declare law and determine rights].) 
 
Unpersuasive is Berglund’s contention that because section 1283.05’s 
subdivision (c) does not expressly exclude nonparties from its reach, it should be 
construed as providing only limited, not full, judicial review of an arbitrator’s 
decision against a nonparty.  The statutory language, however, is silent on the 
question.  We cannot here draw any conclusions from the absence of legislative 
action.  (See Mejia v. Reed (2003) 31 Cal.4th 657, 668.) 
 
Insisting that arbitrator discovery orders against nonparties are subject only 
to the limited judicial review that governs arbitration awards to parties, Berglund 
cites to the rule of statutory construction that statutes are to be harmonized to 
avoid anomalies.  (Fair v. Bakhtiari (2006) 40 Cal.4th 189, 199.)  Berglund argues 
it would be anomalous to construe the statutory language in section 1283.05’s 
subdivision (c) as requiring nonparty discovery disputes in arbitration proceedings 
to be submitted to the arbitrator (§ 1283.05, subd. (b)) without also construing 
subdivision (c) as requiring finality of arbitrator discovery decisions.  We perceive 
no anomaly in a statute under which parties to arbitration may seek discovery, 
discovery disputes are submitted to the arbitrator, and arbitrator discovery 
decisions against nonparties are subject to full judicial review.  Such a system 
promotes judicial economy by requiring discovery disputes arising out of 
arbitration to be submitted first to arbitrators—who may be able to resolve many 
 
 11
of those disputes—while protecting the legal rights of nonparties by allowing full 
judicial review of adverse arbitrator discovery orders against them.  Unlike parties 
to the arbitration, nonparties, by definition, have not consented to arbitration and 
consequently have not agreed to the finality of arbitrator decisions.  In this 
context, therefore, the principle of statutory construction that statutory provisions 
are to be harmonized is inapplicable. 
 
Contrary to Berglund’s argument, affording nonparties to arbitration 
proceedings full judicial review of arbitrator discovery orders against nonparties 
does not undermine the policy in favor of arbitration, is not compelled by 
considerations of judicial efficiency, and will not result in inconsistent rulings.  
Arbitration, as we pointed out earlier, is consensual.  (§ 1281.)  The policy in favor 
of enforcing arbitration agreements (Armendariz v. Foundation Health Psychcare 
Services, Inc., supra, 24 Cal.4th at pp. 96-97) is based on the assumption that 
“parties have elected to use [arbitration] as an alternative to the judicial process” 
(County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 
Cal.App.4th 237, 244; see Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 10 
[“an arbitration decision is final and conclusive because the parties have agreed 
that it be so”]).  But that policy does not extend to those who are not parties to the 
arbitration agreement and, by definition, have not consented to arbitration.  
(County of Contra Costa v. Kaiser Foundation Health Plan, Inc., supra, 47 
Cal.App.4th at pp. 244-245; see Volt Info. Sciences, Inc. v. Leland Stanford Jr. U. 
(1989) 489 U.S. 468, 478.)  Although judicial efficiency is important, it must yield 
to the judiciary’s primary function of protecting legal rights.  (See Department of 
Social Services v. Superior Court, supra, 58 Cal.App.4th at p. 738 [courts 
“determine the rights of parties to a controversy before the court”].)  Here, the 
legal rights at issue are those of a nonparty to the arbitration proceeding.  Finally, 
there is no risk of inconsistent decisions between the arbitrator and the court:  If, 
 
 12
upon judicial review of the arbitrator’s discovery order, the court determines that 
the arbitrator erred, the court’s decision supersedes that of the arbitrator.  
 
Nothing in the statutory scheme governing an arbitrator’s discovery 
decisions indicates an intent by the Legislature to deprive a nonparty to the 
arbitration agreement—who, by definition, has not consented to the arbitration—
of full judicial review of an adverse discovery order by the arbitrator. 
DISPOSITION 
 
The judgment of the Court of Appeal is affirmed. 
 
 
 
 
 
 
 
 
KENNARD, J. 
WE CONCUR: 
 
GEORGE, C. J. 
BAXTER, J. 
WERDEGAR, J. 
CHIN, J. 
MORENO, J. 
CORRIGAN, J. 
 
 
 
 
 
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Berglund v. Arthroscopic & Laser Surgery Center of San Diego, LP 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 139 Cal.App.4th 904 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S144813 
Date Filed: July 17, 2008 
__________________________________________________________________________________ 
 
Court: Superior 
County: San Diego 
Judge: Linda B. Quinn 
 
__________________________________________________________________________________ 
 
Attorneys for Appellant: 
 
Higgs, Fletcher & Mack, John Morris, William A. Miller and Michael S. Faircloth for Defendant and 
Appellant. 
 
 
 
 
__________________________________________________________________________________ 
 
Attorneys for Respondent: 
 
Law Office of Marc O. Stern and Marc O. Stern for Plaintiff and Respondent. 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
John Morris 
Higgs, Fletcher & Mack 
401 West A Street, Suite 2600 
San Diego, CA  92101 
(619) 236-1551 
 
Marc O. Stern 
Law Office of Marc O. Stern 
8070 La Jolla Shores Drive, #519 
San Diego, CA  92037 
(858) 677-9200