RN SOLUTION INC. v. CATHOLIC HEALTHCARE West

• Citation: 165 Cal.App.4th 1511,81 Cal.Rptr.3d 892
• Decision Date: 15 August 2008
• Docket Number: No. A118077.,A118077.
• Court: California Court of Appeals
• Parties: RN SOLUTION, INC., et al., Plaintiffs and Respondents, v. CATHOLIC HEALTHCARE WEST et al., Defendants and Appellants.

165 Cal.App.4th 1511

81 Cal.Rptr.3d 892

RN SOLUTION, INC., et al., Plaintiffs and Respondents,

v.CATHOLIC HEALTHCARE WEST et al., Defendants and Appellants.

No. A118077.

Court of Appeal, First District, Division 1, California.

Aug. 15, 2008.

COPYRIGHT MATERIAL OMITTED.

Latham & Watkins, Linda M. Inscoe and Heather E. Marlow, San Francisco, for Defendant and Appellant Catholic Healthcare West.

Cooper, White & Cooper, Stephen D. Kaus, San Francisco, and Edward L. Seidel, Walnut Creek, for Defendant and Appellant Stephen Roderick Robertson.

Cotchett, Pitre & McCarthy, Joseph W. Cotchett, Nanci E. Nishimura and Laura Schlichtmann, Burlingame, for Plaintiffs and Respondents.

MARGULIES, J.

RN Solution, Inc. (RNS) entered into a contract to recruit South Korean nurses for Catholic Healthcare West (CHW), which operates a chain of medical facilities. The contract contains a broad arbitration clause. Under disputed circumstances, RNS's chief executive officer (CEO), Tanya Woo, became involved in an intimate relationship with a CHW vice-president who oversaw the recruiting contract, Stephen Robertson. Woo ultimately pursued felony domestic battery charges against Robertson arising from their personal relationship. Less than a year after those charges were filed, CHW terminated its contract with RNS, citing performance-related reasons.

Woo and RNS sued CHW and Robertson, alleging a series of interrelated contract, business tort, and personal injury claims. The defendants moved separately to compel arbitration of the claims against them. The trial court denied the motions and held that notwithstanding the arbitration agreement all of the claims must be tried in court pursuant to Code of Civil Procedure ¹ section 1281.2, subdivision (c)(1). We reverse and hold that (1) the trial court lacked discretion under section 1280 et seq. to deny arbitration of causes of action covered by the arbitration clause, and (2) the battery-related tort claims do not come within the arbitration clause.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Pre-lawsuit Events

CHW operates a system of 41 hospitals and medical centers in California, Arizona, and Nevada. Before leaving CHW's employment in December 2005, Robertson was a managing agent and a vice-president of human resources for CHW and worked out of its headquarters in San Francisco. RNS is a California corporation that recruits nurses in South Korea and places them in hospitals in the United States. Woo is RNS's president, CEO, and founder.

In 2001, CHW's Bay Area division began recruiting nurses from South Korea through an exclusive 36-month contract with RNS. Under the contract, RNS received a fee for each Korean nurse recruited by it and hired by CHW. In June 2005, RNS and CHW renewed the contract for another 36 months. Both agreements included mandatory “Dispute Resolution” provisions, which required that “any dispute between CHW and [RNS] aris[ing] out of the services contracted for in this Agreement” be resolved by a two-step process consisting of a “meet and confer” followed by arbitration. The arbitration step of the process was described in relevant part as follows: “Upon written demand by either party, and after exhaustion of the Meet and Confer process set forth above, any dispute arising out of or in connection with this Agreement, including any question regarding its existence, interpretation, validity or termination, shall upon written demand by either party, be referred to the American Arbitration Association....” A choice-of-law provision in both agreements specified that they were to be construed and enforced “exclusively in accordance with the internal laws of the State of California.”

The agreements were signed by an officer of CHW and by Woo on behalf of RNS.

In June 2002, CHW designated Robertson to manage the CHW contract and instructed Woo to report to him directly. In October 2003, Woo entered into a sexual relationship with Robertson and moved into Robertson's residence. Woo alleges that Robertson coerced her into the relationship by threatening her with the loss of RNS's exclusive contract and threatening to fire some of the nurses placed by RNS, if she did not give in to his demands.

According to Woo, Robertson soon began a pattern of violent and abusive behavior toward her at home when he drank. In a July 2004 incident, he yelled at her, choked her, and pushed her to the floor. In early October 2004, Robertson punched Woo in the face, causing swelling and damage to her left eye that required medical treatment. In December 2004, while the two were living temporarily in Woo's house, Woo sensed that Robertson was going to attack her and attempted to protect herself by barricading herself in a room. Robertson allegedly forced the door open, hit Woo in the face, and threw her on the floor. He threatened to use a razor on her and warned her not to leave him. When Robertson left the room, Woo fled to a neighbor's house and called 911. Robertson was arrested and charged with five felony counts, including two counts of corporal injury on a cohabitant (Pen.Code, § 273.5, subd. (a)), assault by means likely to cause great bodily injury (Pen.Code, § 245, subd. (a)(1)), and false imprisonment (Pen.Code, § 236). Robertson ultimately pled guilty to two counts of felony vandalism for damage caused to a door and painting in Woo's house.

Robertson's responsibility for managing the RNS contract ended following his December 2004 arrest. According to Woo, this was not brought about at the initiative of CHW's management, but was necessitated by stay-away orders issued by the court. Woo alleges that beginning in the spring of 2005, she began to encounter resistance within CHW in her efforts to recruit nurses for the company. Woo wrote to the CHW board chair summarizing her relationship with Robertson, his threats to disrupt RNS's business relationship with CHW if Woo did not submit to his sexual demands, and his violence. Woo stated that RNS had not placed a single nurse with CHW following Robertson's arrest, and expressed her belief that CHW executives were retaliating against her for complaining about Robertson's conduct and for testifying at the preliminary hearing in the criminal proceedings against him. CHW's board chair wrote back advising that Woo's charges had been brought to the attention of CHW's senior leadership and that CHW had begun an investigation of them. Woo was informed at the end of August 2005, that CHW had found no evidence of retaliation against her or RNS.

In October 2005, CHW terminated RNS's contract, citing as material breaches by RNS that the nurses it recruited lacked “contractually required English language skills” and that RNS used the CHW logo without prior authorization. Woo and RNS rejected these grounds as demonstrably flimsy and pretextual. This lawsuit was filed in October 2006.

B. The Complaint

Woo and RNS allege 16 causes of action: (1) breach of contract against CHW; (2) breach of the covenant of good faith and faith dealing against CHW; (3) sexual harassment in violation of Government Code section 12940, subdivision (j) against both defendants; ² (4) retaliation in violation of Government Code section 12940, subdivision (h) against both defendants; ³ (5) sexual harassment in violation of Civil Code section 51.9 against both defendants; ⁴ (6) gender-based violence in violation of Civil Code section 51.7 against both defendants; ⁵ (7) gender violence in violation of Civil Code section 52.4 against Robertson; ⁶ (8) assault against Robertson; (9) battery against Robertson; (10) negligence against both defendants; ⁷ (11) defamation against both defendants; ⁸ (12) tortious interference with prospective economic advantage against both defendants; ⁹ (13) false imprisonment against Robertson; (14) intentional infliction of emotional distress against Robertson; ¹⁰ (15) declaratory relief against CHW; ¹¹ and (16) injunctive relief against CHW. ¹²

C. Motions to Compel Arbitration

CHW and Robertson moved separately to compel arbitration. CHW sought to compel arbitration of all 11 causes of action asserted against it. Robertson sought to compel arbitration of all 16 causes of action or, if the court determined that not all causes of action were arbitrable, for an order requiring all causes of action to be tried in court.

The court denied both motions. The court found (1) all of the causes of action against CHW, except 6 and 15 (gender-based violence under Civil Code section 51.7 and declaratory relief regarding the arbitration clause), were arbitrable; (2) all causes of action against Robertson, except 6, 7, 8, 9, 13, and 14 (gender-based violence, gender violence, assault, battery, false imprisonment, and intentional infliction of emotional distress), were arbitrable; and (3) the arbitrable and nonarbitrable causes of action were so intertwined as to create a possibility of conflicting rulings on one or more common issues of fact or law if the court were to order the arbitrable claims to proceed to arbitration and the nonarbitrable claims to proceed in court. Based on these findings, the court deemed it appropriate to deny both motions and order all causes of action to be tried in court pursuant to section 1281.2, subdivision (c)(1). ¹³ CHW and Robertson timely appealed from the order denying their motions to compel arbitration.

II. DISCUSSION

A. Application of Section 1281.2, Subdivision (c)

When the motions to compel were litigated in the trial court, all parties apparently assumed that the “third party” provisions of section 1281.2, including subdivisions (c)(1)-(c)(4), would be applicable if the court found that the complaint included arbitrable as well as nonarbitrable claims and that there might be a risk of conflicting determinations if the two types of claims were decided in different forums. Once the court made those predicate findings, the only issue left for determination was whether it should exercise its discretion under...