Source: http://www.stevemehta.com/new-case-on-arbitration-clause-and-third-party-exception-favors-arbitration/
Timestamp: 2019-04-22 10:07:06+00:00

Document:
For those of you interested in nursing home litigation and issues relating to arbitration, the court of appeal just issued a new ruling that supports arbitration clauses and addresses the issue of not allowing arbitration where third parties who may not be subject to arbitration exists.
LASWELL v. AG SEAL BEACH, LLC, found that although an arbitration agreement was signed by one entity, that its related entities that were being represented by the same counsel could also be deemed to be subject to arbitration; and thus were not third parties for the purposes of exercising the court’s discretion to deny arbitration.
The complete decision is set forth below.
Defendants AG Seal Beach, LLC, AG Facilities Operations, LLC and Country Villa Service Corporation appeal from the trial court’s order denying their petition to compel arbitration of plaintiff Louise Laswell’s action against them for elder abuse and related claims. Because we conclude that the trial court erred in denying the petition to compel arbitration, we reverse the order and remand the matter for entry of a new order granting the petition.
On June 26, 2009, Laswell, by and through her daughter Susan Lyons, under a power of attorney, filed a complaint alleging that Laswell had received improper care and treatment at the 24-hour health facility in Seal Beach where she resided from October 21, 2008 to December 10, 2008. Laswell was admitted into the facility at age 92 for post-operative rehabilitative care following hip surgery. In her complaint, she named as defendants AG Seal Beach, LLC, the licensee and operator of the health facility doing business as Country Villa Seal Beach Healthcare Center; AG Facilities Operations, LLC, the owner of AG Seal Beach, LLC and Country Villa Seal Beach Healthcare Center; and Country Villa Service Corporation, doing business as Country Villa Health Services, the management company of Country Villa Seal Beach Healthcare Center in charge of the day-to-day operation, patient care and maintenance of the health facility (collectively, defendants).
According to the complaint, while Laswell resided at Country Villa Seal Beach Healthcare Center, she was neglected, abandoned and abused, resulting in injuries to her body, severe anemia, an infection in the coccyx area, right lower lobe pneumonia and malnutrition. Laswell alleged causes of action against all defendants for elder abuse under the Elder Abuse and Dependent Adult Civil Protection Act (Welf. & Inst. Code, § 15600 et seq.); negligence; willful misconduct; and violation of Penal Code section 368, and an additional cause of action against AG Seal Beach, LLC, as the licensee of the health facility, for violation of Health and Safety Code section 1430, subdivision (b). Laswell sought compensatory and punitive damages, statutory remedies, attorney fees and costs.
On August 13, 2009, defendants filed the operative amended answer to Laswell’s complaint, asserting numerous affirmative defenses, including that the matter is subject to binding arbitration.
Soon thereafter, on September 10, 2009, Laswell filed a motion for trial preference under Code of Civil Procedure section 36, subdivisions (a) and (d), on grounds that she was 93 years old and had been certified twice by a physician for hospice care as terminally ill with a life expectancy of less than six months and, as a result, that trial preference was necessary to preserve her interests and prevent prejudice in the matter. After a case management conference, the trial court granted the motion, noting that Laswell was 93 years old and terminally ill, and set a trial date of February 1, 2010.
On or about November 19, 2009, defendants moved to compel arbitration, asserting that a valid arbitration agreement provided for arbitration of “any and all disputes or claims . . . arising out of the provision of services by the [f]acility,” defined as Country Villa Seal Beach Healthcare Center, or that “allege violations of the Elder Abuse and Dependent Adult Civil Protection Act.” According to defendants, the arbitration agreement complied with all of the requirements specified in Health and Safety Code section 1599.81 for arbitration clauses in contracts of admission to health facilities, Laswell had signed the agreement consenting to arbitration, and the agreement had never been revoked. Defendants thus asserted the matter was required to proceed in arbitration, but Laswell refused to arbitrate the dispute.
Laswell opposed the petition, arguing, as relevant to this appeal, that (1) the arbitration agreement was invalid and unenforceable because Laswell lacked the capacity to execute it; (2) the presence of third-party defendants not subject to arbitration and the possibility of conflicting rulings on common issues of law and fact rendered arbitration inappropriate; and (3) the causes of action for elder abuse and violation of Health and Safety Code section 1430, subdivision (b), are not arbitrable.
In reply, defendants conceded that, as specified in Health and Safety Code section 1599.81, subdivision (d), the cause of action for violation of Health and Safety Code section 1430, subdivision (b), was not subject to arbitration, but argued it was a small component of Laswell’s case, could be litigated in court to determine any statutory remedies and attorney fees after arbitration and should not operate as a pleading tactic to defeat a valid arbitration agreement and undermine the public policy in favor of arbitration. Defendants also asserted that Laswell had not demonstrated mental incapacity and that all defendants were related Country Villa entities, represented by the same counsel, and would consent to arbitration.
Although the trial court concluded that defendants had made a “prima facie case for arbitration,” it denied the petition to compel arbitration. Viewing whether to compel arbitration as a discretionary question, the court decided that it would not “make sense to send the matter to arbitration” because (1) there were parties who would not participate in the arbitration given that they were not part of the agreement; (2) there were some causes of action not subject to arbitration; (3) the trial date was set for less than two months away and the case would proceed just as expeditiously in court as in arbitration; (4) Laswell was 93 years old and there need not be two proceedings under the circumstances; and (5) the question of arbitration should have been raised more promptly, such as when Laswell had moved for trial preference, although that failure was not necessarily a waiver of the right to arbitrate.
Although concluding that defendants had set forth a “prima facie case for arbitration,” the trial court exercised discretion to deny arbitration, initially concluding that there were defendants who would not participate in the arbitration because they were not parties to the agreement. The trial court thus at least implicitly concluded that the threshold requirement for application of Code of Civil Procedure section 1281.2, subdivision (c), that there were third parties not subject to the arbitration agreement was met and, as a result, it had discretion to deny arbitration. But the trial court’s conclusion that Code of Civil Procedure section 1281.2, subdivision (c), applies was erroneous and, therefore, it had no discretion to deny arbitration.
As noted, the arbitration agreement provided for arbitration of “any and all disputes or claims . . . arising out of the provision of services by the [f]acility,” defined as Country Villa Seal Beach Healthcare Center, or that “allege violations of the Elder Abuse and Dependent Adult Civil Protection Act” and was signed by a representative of the facility. The trial court seemingly adopted Laswell’s argument that the agreement covered only AG Seal Beach, LLC, doing business as Country Villa Seal Beach Healthcare Center—the facility where Laswell had resided—and the presence of AG Facilities Operations, LLC and Country Villa Service Corporation as defendants in the action demonstrated that there were third parties not subject to the arbitration agreement and thus invoked Code of Civil Procedure section 1281.2, subdivision (c). This argument, however, is faulty because AG Facilities Operations, LLC and Country Villa Service Corporation are not third parties for purposes of Code of Civil Procedure section 1281.2, subdivision (c), and thus the third-party exception does not apply.
Laswell’s reliance on Birl v. Heritage Care LLC (2009) 172 Cal.App.4th 1313 for support that Code of Civil Procedure section 1281.2, subdivision (c), applies here is unpersuasive. In that case, the family of a deceased patient brought an action for elder abuse and related claims against several nursing facilities, a hospital and its affiliated physicians. (Id. at pp. 1315–1317.) One of the nursing facilities sought to enforce an arbitration agreement as to certain causes of action, while recognizing the hospital, its affiliated physicians and the two other nursing facilities were unrelated third parties not subject to the arbitration agreement. (Id. at pp. 1317–1318.) The appellate court affirmed the trial court’s discretionary denial of arbitration under Code of Civil Procedure section 1281.2, subdivision (c), concluding that the presence of the third-party hospital and nursing facilities invoked the provision and its other requirements were met because conflicting rulings could result against the different groups of defendants on issues such as apportionment of damages among the parties and other nondefendant health care providers based on their own separate care of the deceased patient. (Id. at pp. 1319–1321.) Birl v. Heritage Care LLC, therefore, involved actual third-party defendants not subject to the arbitration agreement, all of which admittedly were unrelated to the nursing facility seeking to compel arbitration. Here, in contrast, all of the defendants are related entities, and Laswell alleges that each is responsible for her improper care at Country Villa Seal Beach Healthcare Center.
Laswell’s reliance on the presence of her nonarbitrable cause of action against AG Seal Beach, LLC, as the licensee of Country Villa Seal Beach Healthcare Center, under Health and Safety Code section 1430, subdivision (b), to avoid arbitration is equally unpersuasive. A trial court does not have discretion to deny arbitration under Code of Civil Procedure section 1281.2, subdivision (c), absent the presence of a third party, and a plaintiff’s inclusion of a nonarbitrable cause of action in the complaint is not grounds to deny arbitration under the third-party exception. In other words, the presence of a nonarbitrable cause of action is not sufficient by itself to invoke the trial court’s discretion to deny arbitration under Code of Civil Procedure section 1281.2, subdivision (c): “The mere fact that some claims are arbitrable and some are not is surely not the ‘peculiar situation’ meant to be addressed by [Code of Civil Procedure section 1281.2[, subdivision] (c)[,] according to our Supreme Court.” (RN Solution, Inc. v. Catholic Healthcare West, supra, 165 Cal.App.4th at p. 1521.) As a result, Laswell’s nonarbitrable cause of action under Health and Safety Code section 1430, subdivision (b), which seeks statutory remedies and attorney fees based on the same alleged improper care addressed in her arbitrable causes of action, can be litigated in court after completion of the arbitration.
Finally, Laswell’s advanced age and the trial court’s decision to grant her trial preference have no relevance to whether Code of Civil Procedure section 1281.2, subdivision (c), applies and, given it does not, whether to grant the petition to compel arbitration. Nonetheless, Laswell’s advanced age should be considered by the trial court, the parties and the arbitrator in scheduling proceedings on remand.
The order denying the petition to compel arbitration is reversed and the matter is remanded with directions for the trial court to enter a new order granting the petition to compel arbitration of all causes of action except that against AG Seal Beach, LLC for violation of Health and Safety Code section 1430, subdivision (b). Defendants shall recover their costs on appeal.
 Health and Safety Code section 1430, subdivision (b), allows “[a] current or former resident or patient of a skilled nursing facility . . . or an intermediate care facility . . . [to] bring a civil action against the licensee of a facility who violates any rights of the resident or patient as set forth in the Patient’s Bill of Rights in Section 72527 of Title 22 of the California Code of Regulations, or any other right provided for by federal or state law or regulation.” Under the statute, “[t]he licensee shall be liable for up to five hundred dollars ($500), and for costs and attorney fees, and may be enjoined from permitting the violation to continue.” The statute provides that a cause of action thereunder is nonarbitrable.
 Health and Safety Code section 1599.81 requires that “(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.” The parties do not dispute that the arbitration agreement signed by Laswell complied with these statutory requirements.
 As noted, Code of Civil Procedure section 1281.2 contains three limited exceptions to the mandatory enforcement of valid arbitration agreements. On appeal, Laswell primarily defends the trial court’s ruling under subdivision (c) of the statute, which we conclude does not apply here. She also asserts in one paragraph of her respondent’s brief that the arbitration agreement is not valid because she lacked the capacity to enter into any agreement, presumably suggesting the exception in subdivision (b)—that “[g]rounds exist for revocation of the agreement”—applies. That assertion lacks merit. By concluding that defendants made a “prima facie case for arbitration,” the trial court necessarily found that Laswell had the capacity to enter the arbitration agreement. Substantial evidence—based on medical reports, after she fell and broke her hip, indicating that Laswell was alert and oriented as to person, place and time, lives alone and recounted her daily routine and family illness history—supports the trial court’s finding, and we, therefore, cannot disturb it on appeal. (Robertson v. Health Net of California, Inc., supra, 132 Cal.App.4th at p. 1425.) Although in the trial court Laswell also argued the exception in subdivision (a) applies because defendants waived their right to compel arbitration, the trial court did not find a waiver, and on appeal Laswell does not rely on the waiver exception to defend the trial court’s denial of the petition to compel arbitration.

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