Court Opinion

ID: 5452220
Source: CourtListenerOpinion
Date Created: 2022-01-08 19:13:18.690961+00
Date Added: 2024-06-11T08:32:28.455867
License: Public Domain

BROWN, J., Dissenting.
The intended target of the majority’s wrath—the Permanente Medical Group, Inc., Kaiser Foundation Hospitals, and the Kaiser Foundation Health Plan (hereafter Kaiser)—could not be more deserving. I write separately to represent the interests of the unintended victim of the majority’s holding—private arbitration in California.
I. Introduction
Pursuant to the terms of a prior written agreement, the parties in this case submitted a medical malpractice dispute to private, or nonjudicial, arbitration. California law, like corresponding federal law under the United States Arbitration Act (9 U.S.C. §§ 1-16), has long reflected a strong policy in favor of such arbitration.
As this court recently explained, “Title 9 of the Code of Civil Procedure,[1] as enacted and periodically amended by the Legislature, represents a comprehensive statutory scheme regulating private arbitration in this state. (§ 1280 et seq.) Through this detailed statutory scheme, the Legislature has expressed a ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.’ [Citations.] Consequently, courts will ‘ “indulge every intendment to give effect to such proceedings.” ’ [Citations.] Indeed, more than 70 years ago this court explained: ‘The policy of the law in recognizing arbitration agreements and in providing by statute for their enforcement is to encourage persons who wish to avoid delays incident to a civil action to obtain an adjustment of their differences by a tribunal of their own choosing.’ [Citation.] ‘Typically, those who enter into arbitration agreements expect that their dispute will be resolved without necessity for any contact with the courts.’ ” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 [10 Cal.Rptr.2d 183, 832 P.2d 899].)
Although the majority purports to “affirm the basic policy in favor of enforcement of arbitration agreements” (maj. opn., ante, at p. 960), it nonetheless concludes that “the governing statutes place limits on the extent to which a party that has committed misfeasance in the performance of such an agreement may compel its enforcement.” (Ibid.., italics added.) I cannot *990agree with the majority’s interpretation of the governing statutory framework. In my view, except for seeking statutorily prescribed court assistance in the arbitrator selection process (see post, at pp. 992-994), once a private arbitration is pending, a party must seek relief for its adversary’s “misfeasance in the performance” in the arbitral forum, not in the courts. Make no mistake about it. The majority’s decision to validate a party’s unilateral withdrawal from a pending arbitration based on the conduct of its arbitration adversary will wreak havoc on arbitrations throughout the state. Therefore, I respectfully dissent.
II. Factual and Procedural Background
Almost lost in the majority’s exhaustive procedural summary is one key fact—namely, the arbitration process was already underway by the time the plaintiffs unilaterally withdrew. A brief review of the history of the arbitration is in order.
On May 31,1991,2 pursuant to the terms of a “group medical and hospital services agreement,” Wilfredo Engalla, his wife, and their four children (hereafter the Engallas) demanded that Kaiser submit a medical malpractice dispute to binding private arbitration. On June 17, Kaiser submitted to the Engallas’ arbitration demand. Two days later, the Engallas’ counsel sent Kaiser the $150 check “required in order to initiate the arbitration proceed- • ^ j) mg.
The Engallas designated their party arbitrator on July 8, Kaiser designated its party arbitrator on July 17, and the parties confirmed their agreement on a neutral arbitrator on October 22. While the parties were in the process of designating arbitrators, they exchanged a number of discovery requests.
Thereafter, on October 28, the Engallas refused to continue with the pending arbitration.3 The reason the Engallas withdrew from the arbitration was that Kaiser declined to stipulate that Mrs. Engalla’s separate loss of consortium claim survived her husband’s death. It is this unilateral withdrawal from a pending arbitration that the majority’s decision validates.
*991III. Discussion
In evaluating both the Engallas’ fraudulent inducement claim and their waiver claim, the majority focuses on Kaiser’s performance during the course of the aborted private arbitration. According to the majority, the sine qua non of successful fraudulent inducement and waiver claims is unreasonable or bad faith delay by Kaiser. (Maj. opn., ante, at pp. 979-980, 984.) Thus, the majority permits the fraudulent inducement claim to proceed because “there is strong evidence that, despite a high degree of diligence on the part of the Engallas’ counsel in attempting to obtain the timely appointment of arbitrators, Kaiser lacked either reasonable diligence or good faith, or both, in cooperating on these timely appointments.” (Id. at p. 980.) Likewise, the majority permits the waiver claim to proceed because “there is ample evidence that the [Engallas were] diligent in seeking Kaiser’s cooperation, and instead suffered from Kaiser’s delay, a delay which was unreasonable or in bad faith.” (Id. at p. 984.)
Although the majority’s desire to penalize Kaiser’s obduracy is understandable, the consequences of validating a party’s unilateral withdrawal from a pending arbitration based on the conduct of its arbitration adversary will reverberate far beyond the bad facts of the instant case. In stark contrast to the legislative response, which enhances the procedures for keeping a case in private arbitration (see post, at pp. 993-994), the majority expands the procedures for removing a case from arbitration. The majority maintains that section 1281.2 compels its decision. (See maj. opn., ante, at pp. 973, 982-983 & fin. 14.) I cannot agree. That statute delineates certain narrow circumstances in which a trial court may uphold a party’s “refus[al] to arbitrate.” (§ 1281.2.) Nothing in section 1281.2 permits a party that has previously submitted a dispute to arbitration, and thereby agreed to arbitrate, to withdraw from that arbitration at some later date based on the unreasonable or bad faith delay of its adversary.
To construe section 1281.2 in the sweeping fashion advanced by the majority will seriously compromise the integrity of the arbitral process and will impose an unpredictable and unnecessary burden on our trial courts. It is well established that “contractual arbitration has a life of its own outside the judicial system.” (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1805 [13 Cal.Rptr.2d 678]; see also Nanfito v. Superior Court (1991) 2 Cal.App.4th 315, 318 [2 Cal.Rptr.2d 876]; Byerly v. Sale (1988) 204 Cal.App.3d 1312, 1316 [251 Cal.Rptr. 749].) “It is the job of the arbitrator, not the court, to resolve all questions needed to determine the *992controversy. [Citations.] The arbitrator, and not the court, decides questions of procedure and discovery. [Citations.] It is also up to the arbitrator, and not the court, to grant relief for delay in bringing an arbitration to a resolution.” (Titan/Value Equities Group, Inc. v. Superior Court (1994) 29 Cal.App.4th 482, 487-488 [35 Cal.Rptr.2d 4], fns. omitted.)
“This does not mean that a party to an arbitration proceeding has no remedy against dilatory tactics.” (Brock v. Kaiser Foundation Hospitals, supra, 10 Cal.App.4th at p. 1808.) Rather, a party who has suffered as a result of such tactics may seek appropriate relief in the arbitral forum. (Ibid.; see also Titan/Value Equities Group, Inc. v. Superior Court, supra, 29 Cal.App.4th at p. 488; Nanfito v. Superior Court, supra, 2 Cal.App.4th at pp. 318-319; Byerly v. Sale, supra, 204 Cal.App.3d at p. 1316; Young v. Ross-Loos Medical Group, Inc. (1982) 135 Cal.App.3d 669, 673 [185 Cal.Rptr. 536].)
Nor does the fact that the arbitrator selection process in a given private arbitration has not yet been completed preclude a party from obtaining appropriate relief. To the contrary, section 1281.6 provides a mechanism by which a party can seek limited assistance from the trial court in obtaining the appointment of an arbitrator or arbitrators.4 (Burgess v. Kaiser Foundation Hospitals (1993) 16 Cal.App.4th 1077, 1079, 1081-1082 [20 Cal.Rptr.2d 488]; Brock v. Kaiser Foundation Hospitals, supra, 10 Cal.App.4th at pp. 1803-1804; American Home Assurance Co. v. Benowitz (1991) 234 Cal.App.3d 192, 198-202 [285 Cal.Rptr. 626]; Boutwell v. Kaiser Foundation Health Plan (1988) 206 Cal.App.3d 1371, 1374 [254 Cal.Rptr. 173]; Young v. Ross-Loos Medical Group, Inc., supra, 135 Cal.App.3d at pp. 674-675; Cook v. Superior Court (1966) 240 Cal.App.2d 880, 887 [50 Cal.Rptr. 81].) “[O]nce there is an arbitrator appointed pursuant to section 1281.6, the party seeking to expedite the arbitration proceedings can apply to the arbitrator for [appropriate relief].” (Brock v. Kaiser Foundation Hospitals, supra, 10 Cal.App.4th at p. 1804.)
*993I do not share the majority’s view that requiring a party to a private arbitration to file a section 1281.6 petition would “violat[e] the usual expectations of an arbitration agreement.” (Maj. opn., ante, at p. 981.) The majority’s reliance on the statement in Moncharsh v. Heily & Blase, supra, 3 Cal.4th at page 9, that “ ‘[tjypically, those who enter into arbitration agreements expect that their dispute will be resolved without necessity for any contact with the courts’ ” (maj. opn., ante, at p. 979), is misplaced. Moncharsh did not hold that a party to a private arbitration would never have to have any contact with the courts but rather that “judicial intervention in the arbitration process [should] be minimized. [Citations.]” (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 10, italics added.) Indeed, the very paragraph of Moncharsh quoted by the majority emphasizes that title 9 of part 3 of the Code of Civil Procedure—which includes section 1281.6—“represents a comprehensive statutory scheme regulating private arbitration in this state. [Citation.]” (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 9.)
Section 1281.6 is the statutory remedy that our Legislature has provided for resolving disputes in the arbitrator selection process, thereby preventing such disputes from becoming occasions for avoiding private arbitration agreements. The statute’s evident purpose is to facilitate, not to hinder, private arbitration. Requiring a party to employ a legislatively prescribed remedy simply cannot be deemed contrary to the “normal expectations of arbitration participants.” (Maj. opn., ante, at p. 979.) In fact, the arbitration provision at issue in the present case specifically alerts the signatories that “[w]ith respect to any matter not herein expressly provided for, the arbitration shall be governed by California Code of Civil Procedure provisions relating to arbitration.”
The inclusiveness of the language of section 1281.6 belies the notion that it contains some sort of ill-defined exception for unreasonable or bad faith delay. (See maj. opn., ante, at pp. 980-981, 984.) By its own terms, the statute comes into play whenever “the agreed method [of appointing an arbitrator] fails or for any reason cannot be followed.” (§1281.6, italics added.) If there were any doubt that the statutory remedy was intended to apply broadly, the Legislature has now put it to rest. Largely in response to this very case, the Legislature recently enacted Health and Safety Code section 1373.20, subdivision (a)(2), providing that for nonindependent arbitration systems such as Kaiser’s “[i]n cases or disputes in which the parties have agreed to use a tripartite arbitration panel consisting of two party arbitrators and one neutral arbitrator, and the party arbitrators are unable to agree on the designation of a neutral arbitrator within 30 days after service of a written demand requesting the designation, it shall be conclusively presumed that the agreed method of selection has failed and the method *994provided in Section 1281.6 of the Code of Civil Procedure may be utilized.” The new legislation also provides for attorney fees and costs against a party that “has engaged in dilatory conduct intended to cause delay in proceeding under the arbitration agreement.” (Health & Saf. Code, § 1373.20, subd. (b).)
In this case, having previously submitted their dispute to private arbitration and having already completed the arbitrator selection process, the Engallas should have sought relief for Kaiser’s dilatory conduct in the pending arbitration. For example, the Engallas could have presented their fraud and waiver claims directly to the arbitrators and requested that they not enforce the arbitration provision. (See ATSA of California, Inc. v. Continental Ins. Co. (9th Cir. 1983) 702 F.2d 172, 175 [waiver claim]; Local 81, Am. Fed. of Tech. Eng. v. Western Elec. Co., Inc. (7th Cir. 1974) 508 F.2d 106, 109 [same]; cf. Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 431-433 [58 Cal.Rptr.2d 875, 926 P.2d 1061] (cone. opn. of Kennard, J.) [fraudulent inducement claim as to the contract as a whole].) Likewise, the Engallas could have requested that the arbitrators sanction Kaiser’s dilatory conduct by deeming Mrs. Engalla’s separate loss of consortium claim to have survived her husband’s death. (See Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362 [36 Cal.Rptr.2d 581, 885 P.2d 994] [describing broad remedial powers of arbitrators].) In fact, at oral argument, the Engallas’ counsel conceded that this case could likely have remained in private arbitration if Mrs. Engalla’s economic loss had been ameliorated.
The one thing the Engallas should not be permitted to do, however, is to circumvent the arbitrators altogether. The consequences of validating a party’s unilateral withdrawal from a pending arbitration will be dramatic. Jurisdictional disputes will inevitably arise. Suppose, for example, that following the Engallas’ unilateral withdrawal, Kaiser had elected to continue to pursue the pending arbitration and that the arbitrators had ultimately entered a default judgment in favor of Kaiser. Would that default judgment have been valid? Would the same have been true if the trial court had simultaneously entered a default judgment in favor of the Engallas in the pending litigation?
In addition, as the Engallas’ counsel acknowledged at oral argument, if this court validates the Engallas’ unilateral withdrawal, other parties to pending arbitrations will doubtlessly engage in the same conduct. Counsel’s answer to this dilemma was that this court should “trust the trial courts.” The majority’s answer is to “emphasize . . . that the delay must be substantial, unreasonable, and in spite of the claimant’s own reasonable diligence” and *995not “the result of reasonable and good faith disagreements between the parties.” (Maj. opn., ante, at p. 984; see also id. at pp. 979-980.)
Neither answer is satisfactory. Under the majority’s holding, which has all the precision of a “SCUD” missile, the resolution of fraudulent inducement and waiver claims will necessarily entail fact-intensive, case-by-case determinations.5 (See maj. opn., ante, at pp. 979-981, 982-984.) The disruptive, time-consuming nature of these determinations is well illustrated by the facts of the present case, in which “[t]he Engallas ultimately had five months to complete discovery [on the petition to compel arbitration], during which time thirteen motions were filed and more than a dozen depositions were taken.” (Id. at p. 970.) Even assuming that the trial courts ultimately resolve all future claims correctly, the interim disruption to pending arbitrations will be simply intolerable.
IV. Conclusion
“Great cases like hard cases make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment. These immediate interests exercise a kind of hydraulic pressure which makes what previously was clear seem doubtful, and before which even well settled principles of law will bend.” (Northern Securities Co. v. United States (1904) 193 U.S. 197, 400-401 [24 S.Ct. 436, 468, 48 L.Ed. 679] (dis. opn. of Holmes, J.).) Although legislators, practitioners, and courts have all expressed concern that disparities in bargaining power may affect the procedural fairness of consumer arbitration agreements, this case amply demonstrates why any solutions should come from the Legislature, whose ability to craft precise exceptions is far superior to that of this court.
However well-intentioned the majority and however deserving its intended target, today’s holding pokes a hole in the barrier separating private arbitrations and the courts. Unfortunately, like any such breach, this hole will eventually cause the dam to burst. Ironically, the tool the majority uses to puncture its hole is the observation that “ ‘ “those who enter into arbitration agreements expect that their dispute will be resolved without necessity for any contact with the courts.” ’ [Citation.]” (Maj. opn., ante, at p. 979; see *996also id. at p. 981.) Because I suspect that parties to private arbitrations will be having quite a bit more contact with the courts than they ever bargained for, I dissent.
On July 30, 1997, the opinion was modified to read as printed above.

 Unless otherwise indicated, all further statutory references are to the Code of Civil Procedure.

 Unless otherwise indicated, all further references to dates are to the year 1991.

 In my view, the private arbitration commenced on June 17, the date Kaiser submitted to the Engallas’ arbitration demand. Even if the arbitration could somehow be deemed to have commenced on a later date, it is beyond peradventure that the arbitration was pending as of October 28, the date of the Engallas’ unilateral withdrawal. By this time, the parties had already designated both the party arbitrators and the neutral arbitrator. Thus, the majority properly characterizes the Engallas’ actions on October 28 as the “termination of the [p]rior [arbitration.” (Maj. opn., ante, at p. 969.) Similarly, in a declaration submitted to the trial court, the Engallas’ counsel correctly references “the termination of the arbitration proceedings.”

 Section 1281.6 provides that “if the agreed method [of appointing an arbitrator] fails or for any reason cannot be followed, ... the court, on petition of a party to the arbitration agreement, shall appoint the arbitrator.” The United States Arbitration Act affords a nearly identical remedy. (See 9 U.S.C. § 5.)
As noted above, the parties in this case had already designated both the party arbitrators and the neutral arbitrator by the time the Engallas unilaterally withdrew from the pending arbitration. Therefore, the majority’s discussion of whether the Engallas should have invoked section 1281.6 at some earlier point in the arbitration is largely beside the point. (See maj. opn., ante, at pp. 980-981, 983-984.) Rather, as discussed in the text, since the arbitration panel was already in place, the Engallas should have sought appropriate relief from the arbitrators. Nonetheless, since the majority deems it necessary to discuss section 1281.6, I address my differences with the majority’s view of that statute.

 The majority’s decision to validate the Engallas’ waiver claim promises to be particularly pernicious because the success of such a claim does not depend on any up-front, precontractual misrepresentations but solely on a party’s performance during the course of a pending arbitration.