Sandoval-Ryan v. Oleander Holdings LLC

• Decision Date: 06 November 2020
• Docket Number: C089486
• Court: California Court of Appeals Court of Appeals
• Parties: Anna SANDOVAL-RYAN, Individually and as Successor in Interest, etc., Plaintiff and Respondent, v. OLEANDER HOLDINGS LLC, et al., Defendants and Appellants.

58 Cal.App.5th 217

272 Cal.Rptr.3d 314

Anna SANDOVAL-RYAN, Individually and as Successor in Interest, etc., Plaintiff and Respondent,

v.OLEANDER HOLDINGS LLC, et al., Defendants and Appellants.

C089486

Court of Appeal, Third District, California.

Filed November 6, 2020

Wilson Getty, William C. Wilson, John T. Tsumura, San Diego; Williams Iagmin and Jon R. Williams, San Diego, for Defendants and Appellants.

Law Office of Sean R. Laird and Sean R. Laird, Sacramento, for Plaintiff and Respondent.

Duarte, J. Plaintiff Anna Sandoval-Ryan signed admission documents on behalf of her brother, Jesus Sandoval,¹ following his admission to Sacramento Post-Acute (Post-Acute), a skilled nursing facility owned by Oleander Holdings, LLC (Oleander) and Plum Healthcare Group, LLC (Plum Healthcare). Among the documents plaintiff signed were two agreements to arbitrate claims arising out of the facility's care for Sandoval.

Sandoval's condition deteriorated while being cared for at the facility, and he was transferred to a hospital where he later died. Plaintiff sued defendants Post-Acute, Oleander, and Plum Healthcare in superior court; she brought claims on her own behalf and on behalf of Sandoval. Defendants moved to compel arbitration of plaintiff's claims. The trial court denied the motion on the basis the agreements were invalid because they were secured by fraud, undue influence, and duress.

Defendants appeal from the trial court's ruling. They contend the parties agreed to allow the arbitrator to decide threshold questions of arbitrability, and the trial court erred by deciding the issue instead. Disagreeing, we affirm.

FACTS AND PROCEEDINGS

Factual Background and Arbitration Agreements

Plaintiff was the conservator and caretaker of her younger brother Sandoval. On September 2, 2014, Sandoval was admitted to Post-Acute, a skilled nursing facility owned and operated by Oleander and Plum Healthcare, for purposes of rehabilitating him from surgery and returning him to a lower level of care. While undergoing care at Post-Acute, Sandoval developed multiple serious health complications. Sandoval was transferred to the hospital on November 5, where he was found to have multiple pressure ulcers

, infection, distended bowel, and fecal impaction. He died on December 24.

At some point after Sandoval was admitted to Post-Acute, plaintiff and a Post-Acute representative signed documentation related to Sandoval's admission to the facility, including two arbitration agreements.² One agreement was titled "Arbitration of Medical Malpractice Disputes," and the other "Arbitration of Dispute Other than Medical Malpractice." Each agreement stated it was "optional" and not required to receive care at the facility. Both agreements provided the arbitrations they contemplate "shall be conducted by one or more neutral arbitrators as mutually agreed upon, to be determined when necessary and to be in accordance with discovery procedures set forth in the California Arbitration Act, California Code of Civil Procedure Section 1280 et seq. and the Federal Arbitration Act (FAA)."

Procedural History

Plaintiff sued defendants in superior court; she brought claims of elder abuse and violation of the Patients’ Bill of Rights on behalf of her brother and claims of negligent infliction of emotional distress and wrongful death on her own behalf. Defendants filed an answer to the complaint and later filed a petition to compel arbitration based on the existence of what it characterized as valid, irrevocable, and enforceable arbitration agreements.

The trial court issued a tentative decision denying defendants’ motion to compel arbitration, which it later confirmed without change following argument. The court recognized that courts typically decide questions of enforceability of arbitration agreements but that the parties may agree to delegate such questions to the arbitrator. But the court found no such delegation of threshold questions of arbitrability to the arbitrator in the instant case. The court then found that plaintiff signed the arbitration agreements "as a result of undue influence and/or duress and that therefore grounds for rescission of the agreements exist" and denied the petition "on this basis alone. The court then noted that even if grounds for rescission of the arbitration agreements did not exist, it would have exercised its discretion to deny the motion to compel pursuant to Code of Civil Procedure section 1281.2, subdivision (c).

Defendants timely appealed following notice of entry of the trial court's order denying their petition to compel arbitration.

DISCUSSION

I

Arbitrability Under the FAA

Defendants contend the arbitration agreement signed by the parties includes a delegation clause that gave the arbitrator the authority to decide whether the arbitration agreement is enforceable. Accordingly, defendants claim the trial court erred by determining the (in)validity of the arbitration agreement itself. As we will discuss, we reject defendants’ contention.³

A. Arbitration Background

"Under both federal and state law, arbitration agreements are valid and enforceable, unless they are revocable for reasons under state law that would render any contract revocable." ( Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 239, 171 Cal.Rptr.3d 621, citing 9 U.S.C. § 2 ; Code Civ. Proc., § 1281 ; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 98, 99 Cal.Rptr.2d 745, 6 P.3d 669.) "Reasons that would render any contract revocable under state law include fraud, duress, and unconscionability. [Citations.]" ( Tiri , at p. 239, 171 Cal.Rptr.3d 621.)

"A petition to compel arbitration is simply a suit in equity seeking specific performance of a contract. [Citation.] The party seeking to compel arbitration bears the burden of proving the existence of an arbitration agreement, while the party opposing the petition bears the burden of establishing a defense to the agreement's enforcement. [Citation.]" ( Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 890, 221 Cal.Rptr.3d 225 ( Aanderud ).)

Because defendants challenge the trial court's interpretation of the parties’ purported contract, our review is de novo. (See, e.g., Employers Mutual Casualty Co. v. Philadelphia Indemnity Ins. Co. (2008) 169 Cal.App.4th 340, 347, 86 Cal.Rptr.3d 383 ["Contractual ... interpretations are questions of law reviewed de novo"].)

B. Delegation Clause

Arbitration agreements are construed to give effect to the intention of the parties. ( Aanderud, supra , 13 Cal.App.5th at p. 890, 221 Cal.Rptr.3d 225.) "If contractual language is clear and explicit, it governs. [Citation.]" ( Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545.)

When a dispute arises between parties to an arbitration agreement, the parties may disagree not only about the merits of the dispute but also about "the threshold arbitrability question—that is, whether their arbitration agreement applies to the particular dispute." ( Henry Schein, Inc. v. Archer and White Sales, Inc. (2019) ––– U.S. –––– [139 S.Ct. 524, 527, 202 L.Ed.2d 480] ( Schein ).) The high court has recognized that parties may "agree by contract that an arbitrator, rather than a court, will resolve threshold arbitrability questions as well as underlying merits disputes." ( Ibid . ) Such threshold or "gateway" questions of arbitrability include whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy. ( Id. at p. –––– .) Indeed, "an ‘agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the ... court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.’ " ( Ibid. )

The question of who has the power to decide issues of arbitrability "turns upon what the parties agreed about that matter." ( First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 ( First Options ).) If the parties agreed to submit arbitrability questions to the arbitrator, then the court reviews the arbitrator's decision under the same standard it reviews other decisions by the arbitrator. ( Ibid. ) "If, on the other hand, the parties did not agree to submit the arbitrability question itself to arbitration, then the court should decide that question just as it would decide any other question that the parties did not submit to arbitration, namely, independently. These two answers flow inexorably from the fact that arbitration is simply a matter of contract between the parties; it is a way to resolve those disputes -- but only those disputes -- that the parties have agreed to submit to arbitration. [Citations.]" ( Ibid . )

Courts presume that the parties intend courts , not arbitrators, to decide threshold issues of arbitrability. ( Aanderud, supra , 13 Cal.App.5th at p. 891, 221 Cal.Rptr.3d 225.) Accordingly, " ‘[t]here are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. [Citation.] Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability.’ [Citation.] The ‘clear and unmistakable’ test reflects a ‘heightened standard of proof’ that reverses the typical presumption in favor of the arbitration of disputes. [Citation.]" ( Id. at p. 892, 221 Cal.Rptr.3d 225.) Where the agreement is silent or ambiguous on the question of who decides threshold arbitrability questions, the court and not the arbitrator should decide arbitrability so as not to force unwilling parties to arbitrate a matter they reasonably thought a judge, not an arbitrator, would decide. ( First Options, supra , 514 U.S. at p. 945, 115 S.Ct. 1920.)

Defendants argue clear and unmistakable delegation of threshold arbitrability questions to resolution by the arbitrator, pointing to specific language in the arbitration...