Rosenberg v. Gerald M. Paul, M.D., Corp.
| Decision Date | 27 September 2018 |
| Docket Number | B277056 |
| Court | California Court of Appeals Court of Appeals |
| Parties | RICHARD C. ROSENBERG et al., Plaintiffs and Respondents, v. GERALD M. PAUL, M.D., A MEDICAL CORPORATION et al., Defendants and Appellants. |
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BS159677)
APPEAL from a judgment of the Superior Court of Los Angeles County. Marc Marmaro, Judge. Affirmed.
Clark Hill and Richard H. Nakamura; Krane & Smith and Marc Smith for Defendants and Appellants.
Landau Gottfried & Berger, James H. Berry, Jr., Kate LaQuay; Greines, Martin, Stein & Richland and Cynthia E. Tobisman for Plaintiffs and Respondents.
* * * * * * Two orthopedists had a contract to share office space and staff, and to split those expenses. After one of the orthopedists died unexpectedly, his widow and adult son continued using the office space and staff for several months to wind down his practice but after a month refused to pay their share of the expenses. To recover that unpaid share, the surviving doctor demanded arbitration against the deceased orthopedist's professional corporation, against his successors in interest, and against the personal representative of his estate. An arbitrator found that the nonpayment of expenses breached the office space and staff sharing contract; ruled that the widow and son—as successors in interest to the deceased orthopedist and/or representatives of his estate—were liable for that breach (along with the professional corporation); and imposed a constructive trust on any funds from the professional corporation's or the deceased orthopedist's assets. The trial court confirmed the award. On appeal, the widow and son argue that the arbitrator lacked the power to decide if they were proper parties to the arbitration as successors in interest to the deceased orthopedist or as personal representatives of his estate; that the arbitrator was wrong to decide that they were; and that the arbitrator got it wrong on the merits. We conclude there is no basis to disturb the arbitrator's award, and affirm.
FACTS AND PROCEDURAL BACKGROUND
Dr. Gerald Paul (Dr. Paul) and Dr. Richard Rosenberg (Dr. Rosenberg) were both doctors of orthopedic medicine in 2001.
That year, they entered into a contract under which they would (1) share, and split the cost of, office space and staff in amedical office suite in Tarzana, California (Agreement, §§ 1.02, 1.04, 1.09); and (2) assist the other's orthopedic practices by seeing one another's patients while the other was on vacation or not on call and by acting as a "first assistant" during surgeries the other performs (Agreement, §§ 2.01, 2.02). The contract clarified that it "constitute[d] a license arrangement for the use of certain office space," but did not "constitute a . . . partnership or joint venture of any type or manner." (Agreement, § 6.09.)
The contract—which the parties informally refer to as the Expense Sharing Agreement (Agreement)—has the following terms pertinent to this appeal:
Ninety-day termination clause. Starting in 2002, either party may terminate the Agreement "upon ninety (90) days notice in writing to the other party." (Agreement, §§ 3.01, 3.02.)
Anti-assignment clause. Because "the rights and obligations of the parties to this Agreement are personal and of a unique nature," neither party may assign the Agreement to another "without the prior written consent of the parties." (Agreement, § 6.05.)
Heirs, legal representatives, and successors clause. The Agreement is "binding on, and inure[s] to the benefit of, the parties to it and their heirs, legal representatives, successors and assigns," but specifies that they, too, are bound by the anti-assignment clause. (Agreement, § 6.05.)
Arbitration clause. "Any controversy or claim arising out of or relating to th[e] Agreement, or the breach thereof is to be "settled by arbitration in accordance with the Rules of the American Arbitration Association." (Agreement, § 6.01.)
Attorney's fees clause. The "successful or prevailing party" in "any legal action or any arbitration or other proceeding . . . brought . . . in connection with any of the provisions of th[e] Agreement" is "entitled to recover reasonable attorneys' fees and other costs incurred in that action or proceeding." (Agreement, § 6.04.)
Dr. Paul signed the Agreement, both individually and on behalf of his medical corporation (Paul PC).
In October 2013, Dr. Paul died while on vacation. He was survived by his wife Judi and his adult son, Johnathan.1
Over the next several months, Dr. Paul's family continued to use the Tarzana office space and staff to collect payments for medical services rendered by Dr. Paul before his death, to transcribe reports for examinations conducted by Dr. Paul before his death, and generally to wind down Dr. Paul's practice. Indeed, less than a month after Dr. Paul's death, Johnathan, who had worked in the office in a non-medical capacity for many years, sent an e-mail to the office staff referring to them as "my staff" and informing them that he would be moving into his father's office and "acting in his role from this point forward."
Judi and Johnathan paid Dr. Rosenberg $60,000 as Dr. Paul's share of the office space and staff expenses for November 2013, but made no further payments. Instead, on January 9, 2014, a lawyer writing on behalf of "Dr. Paul's heirs" informed Dr. Rosenberg that Judi and Johnathan would be vacating theoffice suite "on or before January 15, 2014," and took the position that they owed no further payments for office space or staff.
In May 2014, Dr. Rosenberg filed a demand for arbitration with the American Arbitration Association. The demand alleged claims for breach of contract, common counts, and indemnity and defense, all arising out of the refusal to pay office space and staff expenses. The demand named three respondents: (1) Paul PC; (2) Dr. Paul, "A Deceased Person (by and through his heirs and/or successor[s] in interest . . . )"; and (3) Dr. Paul's "[e]state."
Paul PC responded with (1) an answer raising 21 affirmative defenses, and (2) 10 counterclaims against Dr. Rosenberg.
Dr. Rosenberg filed an amended arbitration demand. The amended demand alleged three additional claims—for fraud (false representations), fraud (omission and nondisclosure), and unjust enrichment. The amended demand also added Judi and Johnathan as respondents in three capacities—"individually," "as heirs and successors in interest to Dr. Paul," and "as representatives of the Paul Estate." The demand expressed Dr. Rosenberg's intent to "ask the Arbitrator for a determination of the capacity in which Judi . . . and Johnathan . . . may be named and required to participate as individual parties to this arbitration."
In response to the arbitrator's directive that the parties confer as to whether Judi and Johnathan were properly named as individuals, the parties filed a joint report memorializing that Dr. Rosenberg (1) would "not join Jud[i] . . . and Johnathan . . . as parties to this arbitration in their individual capacities"; and
(2) would accordingly delete language from two paragraphs in the amended arbitration demand naming them in their "individual capacities." (Italics added.)
A few weeks later, the arbitrator entered a procedural order summarizing that the parties had "stipulated that [Dr. Rosenberg] ha[s] named Jud[i] . . . and Johnathan . . . as Respondents in the case in their representative capacities only and not individually."
Nearly six months later, and a few days before the evidentiary hearing before the arbitrator was set to begin, Paul PC filed an opening brief stating its position that the "sole Respondent in this Arbitration is Paul PC" and that the "individual Paul family members are not parties to this Arbitration" in any capacity.
The arbitrator conducted a four-day evidentiary hearing in late June 2015.
On the second day of the hearing, the arbitrator explained her view that "the intention from the beginning was to have both the estate and the corporation be respondents" and that the parties so "stipulated."
On the last day of the hearing, the attorney for Paul PC, Judi, and Johnathan (collectively, respondents) moved the arbitrator for a nonsuit on the ground that no claim could proceed against Judi or Johnathan "in any capacity." After entertaining extensive argument, the arbitrator said she would "take" "the motion for a nonsuit" "under submission."
Respondents thereafter filed a closing brief, where they again argued that "Judi . . . and Johnathan . . . cannot be liable"to Dr. Rosenberg "in any capacity"—either as individuals or in any representative capacity.
On November 15, 2015, the arbitrator issued a 23-page written award. The arbitrator concluded that Judi and Johnathan were properly named as respondents in the arbitration, even though the Agreement was signed only by Dr. Paul and Paul PC, because they (1) "stepped into the shoes of Dr. Paul and Paul PC [and] continue[d] to run the practice" and wind down its affairs after Dr. Paul's death; and (2) have "participate[d] actively in this Arbitration," including by "accept[ing] the benefit of the stipulation they entered into at the beginning of this case." On the merits, the arbitrator concluded that Paul PC and Dr. Paul had breached the Agreement by not paying for their share of office space and staff expenses through 90 days after the January 9,...
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