Berglund v. Arthroscopic & Laser Center

• Decision Date: 17 July 2008
• Docket Number: No. S144813.,S144813.
• Citation: 79 Cal.Rptr.3d 370,44 Cal.4th 528,187 P.3d 86
• Court: California Supreme Court
• Parties: Daniel L. BERGLUND, Plaintiff and Respondent, v. ARTHROSCOPIC & LASER SURGERY CENTER OF SAN DIEGO, L.P., Defendant and Appellant.

187 P.3d 86

79 Cal.Rptr.3d 370

44 Cal.4th 528

Daniel L. BERGLUND, Plaintiff and Respondent, v. ARTHROSCOPIC & LASER SURGERY CENTER OF SAN DIEGO, L.P., Defendant and Appellant.

No. S144813.

Supreme Court of California.

July 17, 2008.

Higgs, Fletcher & Mack, John Morris, William A. Miller and Michael S. Faircloth, San Diego, for Defendant and Appellant.

Law Office of Marc O. Stern and Marc O. Stern, San Deigo, for Plaintiff and Respondent.

KENNARD, J.

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).

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 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 Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 481, 121 Cal.Rptr. 477, 535 P.2d 341; Marsch v. Williams (1994) 23 Cal.App.4th 250, 255, 28 Cal.Rptr.2d 398.) 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, 10 Cal.Rptr.2d 183, 832 P.2d 899.) 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, 88 Cal. Rptr.2d 366, 982 P.2d 229.) 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, 10 Cal.Rptr.2d 183, 832 P.2d 899) 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, 10 Cal.Rptr.2d 183, 832 P.2d 899), 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, 10 Cal.Rptr.2d 183, 832 P.2d 899; see Vandenberg v. Superior Court, supra, 21 Cal.4th at p. 832, 88 Cal.Rptr.2d 366, 982 P.2d 229). "`As a consequence, arbitration awards are generally immune from judicial review.'" (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 11, 10 Cal.Rptr.2d 183, 832 P.2d 899.)²

Discovery in arbitration is generally limited. (Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, 1088, 106 Cal.Rptr.2d 431; Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 690, 99 Cal.Rptr.2d 809.) 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. 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, 106 Cal.Rptr.2d 431), 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...