Zembsch v. Superior Court, A114157.

• Court: California Court of Appeals
• Citation: 146 Cal.App.4th 153,53 Cal.Rptr.3d 69
• Decision Date: 27 December 2006
• Docket Number: No. A114157.,A114157.
• Parties: Mark ZEMBSCH et al., Petitioners, v. The SUPERIOR COURT of Alameda County, Respondent; Health Net of California, Inc., et al., Real Parties in Interest.

53 Cal.Rptr.3d 69 146 Cal.App.4th 153 Mark ZEMBSCH et al., Petitioners,
v.
The SUPERIOR COURT of Alameda County, Respondent; Health Net of California, Inc., et al., Real Parties in Interest. No. A114157. Court of Appeal, First District, Division 5. December 27, 2006. Certified for Partial Publication.^* As Modified Jan. 11, 2007.

[53 Cal.Rptr.3d 71]

Arnold R. Levinson, Terrence J. Coleman, Rebecca Grey, Pillsbury & Levinson, LLP, San Francisco, for Petitioners.

No appearance of counsel for respondent.

Raul L. Martinez, Elise D. Klein, Lewis Biribois Bisgaard & Smith LLP, Los Angeles, for Real Party in Interest Health Net of California, Inc. and Health Net, Inc.

John E. Dittoe, Joseph P. Mascovich, Reed Smith LLP, Oakland, for Real Party in Interest Alta Bates Medical Group.

GEMELLO, J.

Petitioners Mark and Kimberly Zembsch seek writ review of an order compelling them to arbitrate their claims against their health insurance provider, Health Net of California, Inc., and Alta Bates Medical Group, the physician group that provides medical care to the Zembsch family. In the published part of our opinion, we hold that writ review is appropriate and grant the petition for writ of mandate. We address whether the Health Net enrollment form signed by Mark Zembsch complied with Health and Safety Code section

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1363.1, subdivision (b). That statute requires health care service plans that require binding arbitration to settle disputes to provide a disclosure of arbitration that is "prominently displayed on the enrollment form signed by each subscriber or enrollee." (Health & Saf.Code, § 1363.1, subd. (b).¹) We hold that the enrollment form does not comply with the statutory requirement that the arbitration disclosure be "prominently displayed." Noncompliance with the statute renders any arbitration agreement between Health Net and the Zembschs unenforceable.

In the unpublished part of our opinion, we consider whether Health Net met its burden of proving the existence of an arbitration agreement applicable to the Zembschs' claims. We hold that Health Net did not meet its burden of proving the existence of an arbitration agreement for the years 2002 through 2004. We do not decide whether Health Net met its burden of proving an applicable agreement in 2005 because the arbitration disclosure signed by Mark Zembsch does not comply with section 1363.1, subdivision (b).

Factual and Procedural Background

Although the parties offer sharply divergent versions of the facts surrounding the Zembschs' underlying claims, the Zembschs' petition for writ of mandate seeks review only of the trial court order compelling them to arbitrate. The facts relevant to the issue of arbitrability, and thus to our disposition of this writ petition, are largely undisputed. We summarize these facts below.

The Health Net Plan

Petitioner Mark Zembsch is an attorney employed by the City of Berkeley (the City). As an employee of the City, Zembsch and his family were eligible for group health insurance coverage under a group hospital and professional service agreement between the City and Health Net of California, Inc. (Health Net). On May 9, 2002, Zembsch signed a form enrolling himself, his wife, and his two children in a Health Net plan. The plan Zembsch elected provided health maintenance organization (HMO) coverage. With this type of coverage, most services are provided by or coordinated with a member's primary care physician and a contracting physician group. Alta Bates Medical Group (Alta Bates) is the physician group that, in contract with Health Net, provides medical care to the Zembsch family.

Although the plan contemplates that most medical care will be provided by the contracting physician group, Health Net's plan permits members to receive a "standing referral" to a specialist. Such a referral allows a member to see a specialist without receiving a specific referral from the member's primary care physician for each visit. A standing referral is authorized by the plan if it is determined to be necessary by the primary care physician, Health Net's medical director, and the member.

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The Health Net Enrollment Form

The enrollment form that Zembsch signed when he joined the Health Net plan is a one-page document entitled "Member Enrollment and Change Form."² Most of the form is a series of blank spaces in which the enrollee fills in personally identifying information. The blanks appear in four boxes separated by boldface black lines. Beneath a boldface black line at the very bottom of the page are two singles-paced, unindented "paragraphs" printed in the smallest typeface used on the form.³ The first and longer of these two paragraphs concerns the enrollee's authorization for the release of medical information. Immediately above the signature line the following paragraph appears: "Arbitration Agreement: I understand that any dispute or controversy, except medical malpractice, that may arise regarding the performance, interpretation or breach of the agreement between myself (and/or any enrolled family member) and Health Net, Health Net Life Insurance Company or any Participating Physician Group/Independent Physicians Association, whether arising in contract, tort or otherwise, must be submitted to arbitration in lieu of a jury or court trial. Please sign and date this application below. Your signature indicates that you have completed all requested information as accurately as possible and understand all agreements implied including your agreement to submit disputes to binding arbitration."

The Dispute Over a Standing Referral

The Zembschs' five-year-old son, Jack, suffers from a life threatening condition known as metatropic dysplasia. Metatropic dysplasia is an extremely rare form of dwarfism characterized by shortened limbs and a badly deformed spine. Jack suffers from multiple orthopedic problems including severe kyphoscoliosis, torticollis, and hip flexion contracture. The small thoracic cavity and stiff chest wall resulting from the condition cause severe restrictive lung disease and can result in cardiopulmonary compromise later in life. Children afflicted with metatropic dysplasia may require tracheotomy and ventilator support. The severity of the condition increases as Jack's skeleton grows, which adds urgency to this writ proceeding.

Given the rarity of Jack's condition, there are very few physicians with any substantial experience in treating it. As a consequence, in August 2004 the Zembschs sought a standing referral to Dr. William G. Mackenzie at the Alfred I. duPont Hospital for Children in Wilmington, Delaware. According to the Zembschs' primary care physician, Dr. Mackenzie is recognized as the leading expert in the treatment of metatropic dysplasia. Alta Bates denied the Zembschs' request because Dr. Mackenzie was an out-of-network provider and Alta Bates determined that the services requested were available "within the Alta Bates Medical Group Network." The Zembschs then filed a number of appeals of Alta Bates' decision, all of which were denied by Health Net.

The Zembschs' Action Against Health Net and Alta Bates

On November 7, 2005, the Zembschs filed an action against Health Net and Alta Bates in the Superior Court of Alameda County. Two days later, Health Net issued

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a standing referral for Jack Zembsch to obtain ongoing consultations with Dr. Mackenzie. According to the Zembschs, this standing referral was inadequate because it was for consultation only.

The Zembschs then filed a first amended complaint on December 5, 2005, alleging breach of contract and a number of other causes of action arising out of the defendants' alleged refusal to honor their obligations under the Health Net plan. Both Health Net and Alta Bates moved to compel arbitration and stay the action. Petitioners opposed the motions by raising various defenses. Among these defenses was the argument that the arbitration disclosure on Health Net's enrollment form failed to comply with section 1363.1 because the arbitration disclosure was not "prominently displayed" on the enrollment form signed by Zembsch. The Zembschs also argued later that Health Net had failed to establish the existence of an arbitration agreement applicable to their claims.

After extensive briefing and argument, the trial court granted the defendants' motions in an order filed June 1, 2006. It rejected petitioners' argument that Health Net had failed to comply with section 1363.1. Specifically, the trial court concluded that the disclosure did not violate section 1363.1, subdivision (b) because it was sufficiently prominently displayed to comply with the statute. The trial court noted that "the subject disclosure is contained in a separate paragraph, and the heading is in bold type. While there is no doubt that the disclosure could have been made more prominent, the Court concludes that it adequately fits the standard definition of `prominent,' i.e. `standing out' ... or `readily noticeable.'" The trial court rejected the Zembschs' other arguments and accordingly held that "there is an enforceable written agreement between

Health Net and [the Zembschs] to arbitrate the disputes set forth in [the Zembschs'] complaint herein." It ordered the Zembschs to submit their claims against Health Net and Alta Bates to arbitration.

On June 16, 2006, the Zembschs filed a petition for writ of mandate and/or prohibition in this court seeking review of the trial court order compelling arbitration. On June 22, 2006, we issued an order staying the action below and permitting real parties in interest to file points and authorities in opposition to the petition. Both Health Net and Alta Bates filed oppositions, to which petitioners replied.

Discussion

Petitioners raise challenges to the existence and enforceability of the arbitration agreement. We agree with petitioners that Health Net failed to meet its burden of proof with...