Coast Plaza Doctors Hosp. v. Blue Cross

• Decision Date: 10 August 2000
• Docket Number: No. B132500.,B132500.
• Citation: 83 Cal.App.4th 677,99 Cal.Rptr.2d 809
• Court: California Court of Appeals Court of Appeals
• Parties: COAST PLAZA DOCTORS HOSPITAL, Plaintiff and Respondent, v. BLUE CROSS OF CALIFORNIA, Defendant and Appellant.

99 Cal.Rptr.2d 809

83 Cal.App.4th 677

COAST PLAZA DOCTORS HOSPITAL, Plaintiff and Respondent, v. BLUE CROSS OF CALIFORNIA, Defendant and Appellant.

No. B132500.

Court of Appeal, Second District, Division 3.

August 10, 2000.

As Modified September 7, 2000.

Review Denied October 25, 2000.

Musick, Peeler & Garrett, Los Angeles, William H. Hastie, Cheryl A. Orr and Nancy A. Ramirez, Los Angeles, for Defendant and Appellant.

Payne & Fears, Daniel L. Rasmussen, Thomas L. Vincent and Paul A. Bokota, Irvine, for Plaintiff and Respondent.

CROSKEY, J.

In this case, appellant Blue Cross of California ("Blue Cross") attacks the trial court's denial of its motion to compel the arbitration of a dispute with respondent Coast Plaza Doctors Hospital ("Coast Plaza"). After Coast Plaza filed an action against Blue Cross on numerous tort theories, all related to the reimbursement rates paid by Blue Cross pursuant to a service agreement with Coast Plaza, Blue Cross filed a petition to compel arbitration of Coast Plaza's claims. The service agreement contained an arbitration clause, but Coast Plaza argued that it did not apply because (1) Coast Plaza had terminated the agreement two days before filing suit, (2) its action sought injunctive relief which, as a matter of law, is not arbitrable, and (3) the arbitration provision was unconscionable and therefore unenforceable. The trial court denied Blue Cross' motion.

After a review of the record, we are persuaded that the arbitration clause does apply to this dispute and is enforceable. Coast Plaza's claim for injunctive relief can be severed and stayed pending the conclusion of the arbitration which may have the effect of resolving all issues between the parties. We therefore will reverse the order denying Blue Cross' petition, issue an order staying all further proceedings in the trial court, including all discovery, pending completion of the arbitration, and remand for appropriate proceedings.

FACTUAL AND PROCEDURAL BACKGROUND¹

Coast Plaza is an acute care hospital operating in Norwalk, California. Blue Cross is a managed health care services provider. On January 1, 1996, Coast Plaza and Blue Cross entered into a Comprehensive Contracting Service Agreement ("Service Agreement") under which Blue Cross agreed to reimburse Coast Plaza at set rates (hereinafter, the "Reimbursement Rates") for specified health care services supplied by Coast Plaza to patient members of Blue Cross' health care plans. The Service Agreement was for an initial fixed term of two years, but was terminable thereafter upon 180 days' written notice by either party. The Service Agreement also had a very broad arbitration clause.²

For several months beginning in the Fall of 1998 and ending in January 1999 Coast Plaza sought to renegotiate Blue Cross' Reimbursement Rates. Coast Plaza claimed that it needed an increase in such rates if it were going to continue serving patients who were Blue Cross members; at the rates specified in the Service Agreement Coast Plaza lost money with respect to Blue Cross patients. When Blue Cross refused to negotiate satisfactorily higher Reimbursement Rates, Coast Plaza, in December of 1998, "informed" Blue Cross that it was terminating the Service Agreement, effective February 28, 1999.³

Two days later, on March 2, 1999, Coast Plaza filed the instant action and alleged causes of action for (1) unfair trade practices in violation of Business and Professions Code, section 17020, et seq., (2) unfair trade practices based on acts of intimidation, (3) intentional, and (4) negligent interference with prospective economic advantage, and (5) unfair business practices in violation of Business and Professions Code, section 17200. The basic charging allegations upon which each of these causes of action is based are that Blue Cross' Reimbursement Rates, as specified in the Service Agreement, are too low to allow Coast Plaza to recover its costs, much less make a profit. When Coast Plaza sought in, good faith, to renegotiate these rates Blue Cross unreasonably refused to consider or agree to any adequate increase, although it did agree to pay significantly higher rates to other larger hospitals in Southern California. Thus, Coast Plaza alleges Blue Cross discriminates against smaller hospitals in less affluent communities and does so with the purpose of putting them out of business. Indeed, Blue Cross unilaterally stated that if Coast Plaza did not accept a rate increase limited to .8%, Blue Cross would be forced to institute "certain administrative actions" which Coast Plaza interpreted to mean that all physicians and providers in the area would be advised not to utilize Coast Plaza for any Blue Cross patient services. All of this, Coast Plaza alleged, was done with the intent to "financially ruin Coast Plaza and other small hospitals who principally serve low-income patients and/or neighborhoods." In effect, Blue Cross was depriving these smaller hospitals of access to a large segment of business controlled by Blue Cross and precluding low-income patients from seeking health care services from the chosen provider in the community. Coast Plaza claims that the Reimbursement Rates imposed by Blue Cross are unreasonable, discriminatory and anti-competitive, and will have a serious adverse financial impact on Coast Plaza. In its complaint, Coast Plaza sought both compensatory and punitive damages as well as injunctive relief.

As soon as permitted under Code of Civil Procedure, section 2025, subdivision (a)(2), Coast Plaza initiated discovery proceedings. It served document production subpoenas on six hospitals seeking (1) records of reimbursement from Blue Cross for medical services provided to Blue Cross subscribers, (2) copies of contracts with Blue Cross, (3) internal documents relating to its negotiations with Blue Cross, (4) documents relating to any dispute with Blue Cross regarding reimbursement rates and amounts, and (5) records reflecting Blue Cross' own evaluation of each hospital. Blue Cross objected to these broad discovery requests on a number of grounds, as did at least three of the hospitals involved. On April 1, 1999, Blue Cross filed a motion to quash these subpoenas.

On the same day Blue Cross also filed a petition to compel arbitration of the matters raised by Coast Plaza's complaint. While it is true that the Service Agreement had been terminated by Coast Plaza, effective February 28, 1999, it provided (in paragraph 12.4) that: "After the effective date of termination, this Agreement shall remain in effect for the resolution of all matters unresolved as of that date." (Italics added.) Although, all of Coast Plaza claims sounded in tort, and its complaint was filed after the date of termination, Blue Cross argued that the dispute clearly arose under the Service Agreement and thus fell within the arbitration clause. Coast Plaza opposed the motion, arguing that the arbitration clause was unenforceable as it was unconscionable, did not apply since the Service Agreement had been terminated and, in any event, was precluded because Coast Plaza was seeking injunctive relief. Finally, Coast Plaza also contended that if the matter was sent to arbitration it would be deprived of needed discovery.

On May 14, 1999, the trial court denied the petition to compel arbitration.⁴ It appears that the court's ruling was "without prejudice on the grounds that more discovery was necessary to decide the issue." Blue Cross filed a timely appeal on May 26,1999.

CONTENTIONS OF THE PARTIES

Blue Cross contends that Coast Plaza's claims constitute a dispute arising under the clear and unambiguous provisions of the Service Agreement's arbitration clause. It also argues that the arbitration provision is not unconscionable and must be enforced as to all of Coast Plaza's claims and prayers for relief, except its request for injunction. Pending conclusion of the arbitration, all proceedings in the trial court should be stayed, including discovery.

Coast Plaza, as already noted, makes three arguments for affirmance of the trial court's order: (1) there is no applicable arbitration provision as the Service Agreement had been terminated before this action was filed, (2) in any event, the arbitration clause is unenforceable as it is unconscionable, and (3) the claim for an injunction precludes any arbitration. Coast Plaza also opposes a stay of proceedings pending conclusion of any arbitration which may be required.

As we explain, we conclude that Blue Cross is correct. This matter should be submitted to arbitration pursuant to the agreement between the parties.

DISCUSSION

Unsurprisingly, this case is resolved by the application of clear statutory authority and settled decisional law. First, an order denying a petition to compel arbitration is an appealable order. (Code Civ. Proc., § 1294, subd. (a); Wilson v. Kaiser Foundation Hospitals (1983) 141 Cal.App.3d 891, 895, 190 Cal. Rptr. 649.) Second, the critical issues raised in this case turn on the interpretation of the Service Agreement, particularly the arbitration clause. There is no factual dispute as to the language of that agreement. Thus, we are required to determine the legal interpretation to be given that language and that is something we do de novo. We are not bound by the trial court's construction or interpretation. (See Valsan Partners Limited Partnership v. Calcor Space Facility, Inc. (1994) 25 Cal.App.4th 809, 817, 30 Cal.Rptr.2d 785; Titan Group Inc. v. Sonoma Valley County Sanitation Dist. (1985) 164 Cal. App.3d 1122,1127, 211 Cal.Rptr. 62.)

With those basic principles in mind, we now turn to the three issues raised by Coast Plaza.

1. The Arbitration Clause Applies To The Claims Asserted In Coast Plaza's Complaint

Coast Plaza contends that the tort claims it has asserted against Blue Cross reflect a dispute that is beyond the scope of the arbitration clause. However, an examination of the real nature of that dispute and the...