Dougherty v. Roseville Heritage Partners

• Decision Date: 30 March 2020
• Docket Number: C087224
• Citation: 260 Cal.Rptr.3d 580,47 Cal.App.5th 93
• Court: California Court of Appeals Court of Appeals
• Parties: Lori DOUGHERTY, Individually and as Successor in Interest, etc., et al., Plaintiffs and Respondents, v. ROSEVILLE HERITAGE PARTNERS et al., Defendants and Appellants.

47 Cal.App.5th 93

260 Cal.Rptr.3d 580

Lori DOUGHERTY, Individually and as Successor in Interest, etc., et al., Plaintiffs and Respondents,

v.ROSEVILLE HERITAGE PARTNERS et al., Defendants and Appellants.

C087224

Court of Appeal, Third District, California.

Filed March 30, 2020

Beach Cowdrey Jenkins, LLP, Spencer H. Jenkins, and Darryl C. Hottinger for Defendants and Appellants.

Newman & Broomand LLP, Daniel S. Newman, Danny A. Barak, and Teresa M. Boyd for Plaintiffs and Respondents.

KRAUSE, J.

In January 2017, the 89-year-old father of plaintiffs Lori Dougherty and Julie Lee (collectively, plaintiffs) died while living in Somerford Place, an elder residential care facility owned and operated by defendants Roseville Heritage Partners, Somerford Place, LLC, Five Star Quality Care, Inc., and Five Star Quality Care-Somerford, LLC (collectively, defendants). In July 2017, plaintiffs sued defendants, alleging elder abuse and wrongful death based upon the reckless and negligent care their father received while residing in defendants’ facility.

Defendants appeal from the trial court’s April 2018 order denying their motion to compel arbitration and stay the action, contending the arbitration agreement does not contain any unconscionable or unlawful provisions. Alternatively, defendants argue the court abused its discretion by invalidating the agreement as a whole, rather than severing the offending provisions. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs’ father, who suffered from dementia

, was admitted to Somerford Place in November 2016. In the two weeks leading up to his admission, he was removed from two other residential placements due to "aggressive behaviors" and not being a "good fit." Between these placements, plaintiffs’ father had to stay in a local hospital.

Plaintiffs’ father was scheduled to be released from the hospital the evening that Dougherty toured Somerford Place with its marketing director, Jennifer Deal. During the 15- to 20-minute tour, Dougherty told Deal that Somerford Place was "the only feasible care option" for her father. At the time, Dougherty had power of attorney for her father.

In Dougherty’s affidavit opposing defendants’ motion to compel arbitration, she stated that immediately after the tour, Deal presented her with 70 pages of admission documents. Pages 43 through 45 of the packet contained an arbitration agreement (the Agreement). Deal instructed Dougherty to sign the documents in the packet. Dougherty was "relieved" to have found a placement for her father; she was "crying" and "emotionally exhausted" as she signed the admission forms. Deal did not inform Dougherty that she could reject, negotiate or modify any of the documents, which were provided on preprinted forms. Dougherty therefore "did not believe that [she] could modify, negotiate, or refuse any part of the admission documents." Dougherty stated she did not learn she had signed an arbitration agreement until after she filed the complaint against defendants.

Shortly after Dougherty finished signing the admission packet, her father arrived via ambulance. Deal had to stay with him while Dougherty "hurried" to the hospital to retrieve her father’s belongings.

Deal testified in deposition proceedings that she had never read the arbitration agreement in its entirety, nor had she received training on it. Although she did not review each paragraph of the arbitration agreement with a prospective resident, she would give a "general overview" that it was an arbitration agreement where both sides waived their rights to a jury trial, and both parties agreed to abide by the arbitrator’s ruling. She would let a potential resident with questions about the agreement know that he or she could read it. Of the 20 or so signings she oversaw while working at Somerford Place, only one person had refused to sign the arbitration agreement. She did not say anything because it was not a mandatory document, and that individual eventually became a resident at the facility. Deal was unfamiliar with the American Arbitration Association (AAA) commercial rules (which must be followed under the Agreement), and she would not know where to direct someone to find a copy of the rules, especially since there was no copy at Somerford Place.

1. The Agreement

The Agreement states that all disputes between the parties with more than $25,000 at stake would be resolved through binding arbitration that was not subject to appeal. The arbitration panel would be composed of either one or three members, with the number to be chosen by the resident. The members of the panel would be chosen by the AAA or by mutual agreement by the parties. If a medical issue was "more likely than not" to come before the panel, and the panel consisted of three members, one panel member would be a physician.

The panel would follow the current AAA commercial arbitration rules. The rules were not attached to the Agreement, and the Agreement failed to state where they could be found. The panel could direct discovery, including, per the AAA commercial rules, the exchange of documents between the parties. In addition, in exceptional cases and "upon good cause shown and consistent with the expedited nature of arbitration," the arbitrator had the discretion to order depositions. There was no provision in the rules for interrogatories or requests for admissions.

The panel could grant equitable relief and award economic and noneconomic damages, including for pain and suffering and mental anguish. However, the panel had "no authority" to award punitive or exemplary damages.

The parties were to bear equally the costs and expenses of any arbitration proceedings. However, if the resident supplied an affidavit stating an inability to pay such expenses, defendants would pay the resident’s share of the costs and expenses. In such a situation, the defendants would acquire the right to choose whether the panel would be comprised of one or three arbitrators.

The parties waived their right in advance to a trial by jury for any claims, controversies, or disputes for which arbitration was not allowed by law. The Agreement was to be construed and enforced under the Federal Arbitration Act (FAA) and its provisions were severable, should any portion be declared unenforceable.

The Agreement also provided that it could be amended by the facility upon 30 days’ written notice, and the resident would have 30 days upon receipt of the proposed amendment to terminate the agreement. Finally, each party agreed and acknowledged that it was entering into the Agreement voluntarily, had carefully read it, had asked any necessary questions, and had an opportunity to seek the advice of an attorney before signing it.

The Agreement was signed by Deal (on behalf of Somerford Place) and Dougherty (as her father’s "authorized representative" under a power of attorney).

2. Trial court’s denial of defendants’ motion to compel arbitration

In November 2017, defendants filed a motion to compel arbitration. Plaintiffs opposed the motion, arguing the Agreement was unconscionable and therefore unenforceable, and asked the court to strike the entire agreement. Plaintiffs argued the Agreement was procedurally unconscionable because it was "buried in the middle of" 70 pages of admission documents. Deal also did not go over the Agreement with Dougherty, and plaintiffs were not provided a copy of the AAA commercial rules which would govern the arbitration proceedings. Plaintiffs also pointed to a provision in the Agreement that allowed defendants to modify the Agreement on 30 days’ notice.

According to plaintiffs, if the resident did not agree with the modifications, the resident would then have to notify defendants of his or her intention to move out. In addition, plaintiffs argued, Dougherty was under considerable stress when she signed the documents and "was given no meaningful choice but to accept all terms presented by Deal as they were ." (Original italics.)

Plaintiffs also argued the Agreement was substantively unconscionable because it "sharply curtail[ed]" plaintiffs’ discovery rights. Although the governing AAA commercial rules allowed for document exchange, plaintiffs noted there was no provision allowing for form or special interrogatories, and depositions were only allowed in " ‘exceptional cases ... [and] upon good cause shown.’ " According to plaintiffs, these restrictions were unfair because the Elder Abuse and Dependent Adult Civil Protection Act (the Act) ( Welf. & Inst. Code, § 15600 et seq. ) requires a plaintiff to "prove systematic elder abuse as opposed to isolated mistakes by a facility." Plaintiffs argued the discovery limitations would prevent them from investigating systematic abuse, including defendants’ staffing practices, training, oversight, and regulatory compliance.

Plaintiffs also argued the Agreement unfairly prohibited any arbitration panel from awarding punitive or exemplary damages, even though such damages were available under the Act, and that the Agreement unfairly deprived them of the ability to seek attorney fees.

In addition, plaintiffs argued the Agreement unfairly hid the high cost of the AAA administrative fee schedule, which plaintiffs estimated would exceed $57,000. Finally, plaintiffs argued that defendants had waived their right to enforce the Agreement by breaching their promise to pay plaintiffs’ share of the arbitration costs after plaintiffs provided an affidavit stating they could not afford the costs and expenses of arbitration.

After hearing argument, the trial court denied the motion to compel arbitration. By the time of the hearing, defendants had agreed to pay plaintiffs’ share of the arbitration expenses, thus the court rejected plaintiffs’ waiver argument. But the court ruled that the Agreement was procedurally unconscionable because it was part of a 70-page stack of documents that Dougherty lacked time to review because her father was arriving "imminently" in an ambulance after having been...