Scott v. Yoho , 204 Cal. Rptr. 3d 89 ( 2016 )

Filed 6/22/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
VIVIAN SCOTT et al., B265641
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC556129)
v.
ROBERT A. YOHO et al.,
Defendants and Appellants.
APPEAL from an order of the Superior court of Los Angeles County, Howard L.
Halm, Judge. Reversed.
Carroll, Kelly, Trotter, Franzen, McKenna & Peabody, Mark V. Franzen and
Steven J. Wysocky for Defendants and Appellants.
Cynthia Chihiak & Associates, Cynthia Chihiak and Amy R. Martel for Plaintiffs
and Respondents.
I. INTRODUCTION
Defendants, Robert A. Yoho, M.D. and New Body Cosmetic Surgery Center,
appeal from a June 18, 2015 order denying their motions to compel arbitration.
Defendants seek to enforce three arbitration agreements signed by the decedent, Kenisha
Parker, against plaintiffs, who are her relatives. Plaintiffs are: Vivian Scott, individually
and as guardian ad litem for a minor, D.G.; S.T., a minor; and La’Joyce King. Robert
Lee Turner, Jr. is the guardian ad litem of S.T. Defendants argue the three arbitration
agreements are enforceable under the Federal Arbitration Act. We conclude: the three
arbitration agreements are subject to limited preemptive effect of the Federal Arbitration
Act; the 30-day rescission right in Code of Civil Procedure1 section 1295, subdivision (c)
is preempted by the Federal Arbitration Act; and thus the motions to compel arbitration
should have been granted. We reverse the order denying the motions to compel
arbitration.
II. BACKGROUND
A. Allegations of the First Amended Complaint and Defendants’ Answer
Plaintiffs’ first amended complaint alleges causes of action for wrongful death,
medical malpractice and survivorship. Ms. Parker consulted with defendants for various
plastic surgery procedures, and on September 3, 2014, Ms. Parker underwent lipoplasty
and suction lipectomy. Following the surgery, she suffered respiratory arrest and died on
September 3, 2014 as a direct and proximate result of defendants’ negligence and
carelessness.
1
Further statutory references are to the Code of Civil Procedure unless otherwise
specified.
2
Defendants filed a general denial of the first amended complaint’s allegations.
Among the 23 affirmative offenses asserted, defendants alleged, “That the instant dispute
arises from a matter covered by a binding arbitration agreement between the parties, and
that these answering defendants desire that this matter be therefore submitted to binding
arbitration in accordance with the terms of the Arbitration Agreement.”
B. Defendants’ Motion and Amended Motion to Compel Arbitration and Plaintiffs’
Opposition
1. The parties’ legal arguments
On July 9, 2015, defendants filed an amended motion to compel arbitration.
Defendants argued: plaintiffs’ wrongful death claims were subject to physician-patient
arbitration agreements signed by Ms. Parker on March 8, March 11 and September 4,
2013; the three arbitration agreements applied to plaintiffs as Ms. Parker’s heirs and the
agreements were subject to the Federal Arbitration Act; the 30-day cancellation period in
section 1295, subdivision (c) is preempted by the Federal Arbitration Act; and an open
book account was created as a result of Ms. Parker’s first procedure which governed
future transactions between the parties. In connection with the preemption argument,
defendants argued that the 30-day rescission period in section 1295, subdivision (c) is not
a legal provision applicable generally to this state’s contracts. Rather, section 1295,
subdivision (c) applies only to health care agreements to arbitrate and thus is preempted
by the Federal Arbitration Act. (Doctor’s Associates, Inc. v. Casarotto (1996) 517 U.S.
681, 686-687 (Doctor’s Associates); Morrison v. Colorado Permanente Medical Group
(D.Col. 1997) 983 F. Supp. 937, 942-943 (Morrison); Basura v. U.S. Home Corp. (2002)
98 Cal. App. 4th 1205, 1212-1215 (Basura.)
In opposition, plaintiffs argued the three arbitration agreements were
unenforceable because they did not comply with section 1295. Plaintiffs contended the
three arbitration agreements did not contain a provision notifying Ms. Parker of her right
3
to rescind them within 30 days of signing. In addition, plaintiffs asserted Ms. Parker was
denied her statutory right to rescind the three arbitration agreements because she died
within hours of signing the third agreement.
2. The evidence
In support of their motions, defendants submitted the three physician-patient
arbitration agreements, each executed by Ms. Parker. All three arbitration agreements
have identical language. The agreements are labeled, “PHYSICIAN-PATIENT
ARBITRATION AGREEMENT.” Article 1 of all three arbitration agreements states:
“Article 1: Agreement to Arbitrate: It is understood that any dispute as to medical
malpractice, that is as to whether any medical services rendered under this contract were
unnecessary or unauthorized or were improperly, negligently or incompetently rendered,
will be determined by submission to arbitration as provided by law, and not by a lawsuit
or resort to court process except as California law provides for judicial review of
arbitration proceedings. Both parties to this contract, by entering into it, are giving up
their constitutional right to have any such dispute decided in a court of law before a jury,
and instead are accepting the use of arbitration.” Article 2 of the arbitration agreements
provides: “Article 2: All Claims Must be Arbitrated: It is the intention of the parties
that this agreement shall cover all claims or controversies whether in tort, contract or
otherwise, and shall bind all parties whose claims may arise out of or in any relation to
treatment or services provided or not provided by the physician including any spouse or
heirs of the patient and any children, whether born or unborn, at the time of the
occurrence giving rise to any claim. . . .” Article 3 of the arbitration agreements
specifies: an arbitration demand must be in writing and communicated to all parties; each
party must select a party arbitrator within a reasonable time; the party arbitrators are to
select a neutral arbitrator within a reasonable time thereafter; and the patient was to
pursue his or her claims with reasonable diligence.
4
Article 4 of all three arbitration agreements states: “Article 4: Retroactive
Effect: The patient intends this agreement to cover services rendered by the physician
not only after the date it is signed (including, but not limited to emergency treatment), but
also before it was signed as well.” In a similar vein, article 5 states: “Article 5:
Miscellaneous Provisions: The patient intends this agreement to cover services
rendered not only after the date it is signed (including, but not limited to emergency
treatment), but also before it was signed as well.”
Below article 5, the following appears on all three arbitration agreements: “I
understand that I have the right to receive a copy of this agreement. By my signature
below, I acknowledge that I have received a copy.” Between this sentence and the
signature lines, the following appears in all three arbitration agreements: “NOTICE: BY
SIGNING THIS CONTRACT YOU ARE AGREEING TO HAVE ANY ISSUE OF
MEDICAL MALPRACTICE DECIDED BY NEUTRAL ARBITRATION AND
YOU ARE GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL. SEE
ARTICLE 1 OF THIS CONTRACT[.]” The arbitration agreements are signed by Dr.
Yoho’s authorized representative and Ms. Parker. The bottom of all three arbitration
agreements states: “A signed copy of this document is to be given to the patient. The
Original is to be filed in Patient’s medical records.”
In addition, defendants relied on the declaration of Dr. Yoho to show the contracts
evidenced a transaction involving interstate commerce. (9 U.S.C. § 2.) The issue of
whether the transaction involved commerce relates to defendants’ argument that the 30-
day rescission right in section 1295, subdivision (c) is preempted by the Federal
Arbitration Act. Dr. Yoho’s May 14, 2015 declaration reveals the following. He is a
physician licensed in California and doing business as New Body Cosmetic Surgery.
According to Dr. Yoho, some of the medical supplies used during the liposuction
procedure were shipped from out of state. Dr. Yoho stated, “Of the supplies used by my
practice, roughly 20 percent were shipped from out of state. The original manufacturer of
the materials is estimated to be 90 percent or more out of state, and the corporations
which own the manufacturers largely have corporate headquarters out of state. I can say
5
that definitively, some of the materials used for Ms. Parker’s liposuction procedure
originated from out of state.” In addition, Dr. Yoho advertises his medical practice
through the internet. Dr. Yoho stated, “I advertise my practice of medicine to all fifty
states via the internet, and have done so since 2000. My internet marketing budget is
100% of my current advertising budget. At least 10% or more of telephone calls, mail,
and/or email to/from my office and relating to potential surgery or other medical
treatments provided by myself, were from/to potential or existing patients residing out of
state.”
According to Dr. Yoho, about five percent of his patients come from outside
California. Dr. Yoho declared: “My practice is comprised of approximately 5% of
patients from out of state (including the states of Washington, Oregon, Florida, Georgia,
Tennessee, New York, New Hampshire, Arizona, Nevada, as well as the District of
Columbia) and were treated by me at my office in Pasadena, California.” Dr. Yoho
added, “Approximately less than 5% of my patient fees and earnings were as a result of
payments made by/from patients outside of California.” In addition, the medical practice
has contacts with companies outside California. “My practice contracted (via U.S. mail
or the internet) with approximately 15 companies, insurance providers, entities, and/or
other public or private corporations whose places of business are outside the State of
California. My practice regularly sends and/or receives letters, drafts, checks, inquiries,
and written and telephonic communications from outside of California, and from various
other states, which represents approximately 10% of all such communications in my
practice.” None of Dr. Yoho’s sworn statements concerning the interstate aspects of his
medical practice has been contradicted by plaintiffs.
Both parties relied on language in two signed contracts dated March 8, 2013, and
August 14, 2013. The March 8, 2013 contract contains the following venue and
jurisdiction provision: “I agree that any lawsuit that is brought against Dr. Yoho, his
corporation, associates, or organization, will be tried in Pasadena, California (the ‘venue’
is Los Angeles Superior Court in Pasadena, the ‘jurisdiction’ is the State Court of
California.)” Also, the March 8, 2013 contract contains the following venue and
6
jurisdiction provision that states: “I agree that any lawsuit or arbitration that is brought
against Dr. Yoho, his corporation, associates, or organization, will be tried in Pasadena,
California (the ‘venue’ is Los Angeles Superior Court in Pasadena, the ‘jurisdiction’ is
the State Court of California[])[.] Note, you have signed a binding arbitration contract
and this above applies to any court involvement that might be necessary for arbitration, or
any legal action that enters the courts.” Finally, the August 14, 2013 contract repeats
verbatim the language in the immediately preceding quotation.
C. Trial Court’s Ruling
On June 18, 2015, the hearing was held and the trial court denied defendants’
motions to compel arbitration and say the action. The trial court found Ms. Parker signed
three arbitration agreements with defendants and that each arbitration agreement
contained language required by section 1295, subdivisions (a) and (b). The trial court
found the third arbitration agreement dated September 4, 2013 was the operative
agreement because it was the most recent contract.
The trial court ruled the third arbitration agreement was unenforceable under the
reasoning of Rodriguez v. Superior Court (2009) 176 Cal. App. 4th 1461, 1469
(Rodriguez). The trial court found that the third arbitration agreement was unenforceable
because Ms. Parker died before the section 1295, subdivision (c) 30-day rescission period
expired. The trial court rejected defendants’ argument that the Federal Arbitration Act
preempted section 1295, subdivision (c) and the 30-day rescission right. The trial court
found the surgical procedure did not affect interstate commerce such that federal
preemption would apply. The trial court stated: “The other cases cited by Defendants
also fail to support their argument that because approximately 20% of their medical
supplies came from out of state, the Subject Incident involved interstate commerce. [¶]
Moreover, the transaction itself (liposuction procedure) was conducted wholly within the
State of California. And, the parties contracted that the venue would be Los Angeles
Superior Court with the ‘jurisdiction’ the State of California.”
7
III. DISCUSSION
A. Standards of Review
Where the facts are undisputed, the question of whether the transaction involves
interstate commerce so as to implicate the Federal Arbitration Act is a question of law
subject to de novo review. (Basura, supra, 98 Cal.App.4th at p. 1210; see also Omar v.
Ralphs Grocery Co. (2004) 118 Cal. App. 4th 955, 959.) Likewise, interpretation of
section 1295 presents a question of law that is reviewed de novo. (Ibid.; Basura, supra,
98 Cal.App.4th at p. 1210.)
B. Federal Arbitration Act
1. The contracts at issue involve interstate commerce
Defendants challenge the trial court’s ruling that the Federal Arbitration Act did
not apply to the three arbitration agreements. The trial court reasoned the liposuction
procedure did not involve interstate commerce because it was conducted wholly within
California and the parties contracted the venue would be the Los Angeles Superior Court
with California as the jurisdiction. We respectfully disagree with the trial court’s
conclusion that the contracts did not evidence a transaction involving interstate
commerce.
Title 9 United States Code section 2 states in part, “A written provision in . . . a
contract evidencing a transaction involving commerce to settle by arbitration a
controversy thereafter arising out of such contract or transaction . . . shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” The United States Supreme Court has held: “Section 2 is a
congressional declaration of a liberal federal policy favoring arbitration agreements,
8
notwithstanding any state substantive or procedural policies to the contrary. The effect of
the section is to create a body of federal substantive law of arbitrability, applicable to any
arbitration agreement within the coverage of the Act.” (Moses H. Cone Memorial
Hospital v. Mercury Constr. Corp. (1983) 460 U.S. 1, 24; accord CompuCredit Corp. v.
Greenwood (2012) 565 U.S. ___, ___ [132 S. Ct. 665, 669]; Pinnacle Museum Tower
Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal. 4th 223, 235.)
The United States Supreme Court has broadly interpreted the phrase “involving
commerce” in title 9 United States Code section 2 as the functional equivalent of
“affecting” commerce. (Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513
U.S. 265, 273-274 (Allied-Bruce); accord Citizens Bank v. Alafabco, Inc. (2003) 539 U.S.
52, 56 (Alafabco).) The Federal Arbitration Act’s reach is expansive and coincides with
that of the commerce clause. (Allied-Bruce, supra, at p. 274; Perry v. Thomas (1987) 482
U.S. 483, 490.) In Allied-Bruce, the high court expounded on the reach of the commerce
language in title 9 United States Code section 2 as follows: “The initial interpretive
question focuses upon the words ‘involving commerce.’ These words are broader than
the often-found words of art ‘in commerce.’ They therefore cover more than ‘“only
persons or activities within the flow of interstate commerce.”’ United States v. American
Building Maintenance Industries, 422 U.S. 271, 276 (1975) (quoting Gulf Oil Corp. v.
Copp Paving Co., 419 U.S. 186, 195 (1974)) (defining ‘in commerce’ as related to the
‘flow’ and defining the ‘flow’ to include ‘the generation of goods and services for
interstate markets and their transport and distribution to the consumer’); see also FTC v.
Bunte Brothers, Inc., 312 U.S. 349, 351 (1941).” (Allied-Bruce, supra, at p. 273; see
Cole v. Burns Internat. Security Services (D.C.Cir. 1997) 105 F.3d 1465, 1471.) The use
of the terminology “involving commerce” evidences the broadest possible exercise of the
commerce clause power by the Congress. (Alafabco, supra, 539 U.S. at p. 56; Shepard v.
Edward Mackey Enterprises, Inc. (2007) 148 Cal. App. 4th 1092, 1097 (Shepard).
Our colleagues in the Third Appellate District synthesized the United States
Supreme Court’s application of the commerce clause in the arbitration context: “The
Supreme Court revisited the [commerce clause] issue in the context of the [Federal
9
Arbitration Act] in Alafabco, supra, 539 U.S. 52. There, the contract was a debt
restructuring agreement between an Alabama lending institution and an Alabama
fabrication and construction company. (Id. at p. 53.) The Alabama court had not found
the requisite substantial effect on interstate commerce, as required by [United States v.]
Lopez [(1995) 514 U.S. 549] because there had been no showing ‘“that any portion of the
restructured debt was actually attributable to interstate transactions; that the funds
comprising that debt originated out-of-state; or that the restructured debt was inseparable
from any out-of-state projects[.]”’ (Id. at p. 55.)” (Shepard, supra, 148 Cal.App.4th at p.
1098.)
The Shepard court explained when the United States Supreme Court deemed the
commerce clause was implicated by a general practice that substantially bears on
interstate commerce: “The Supreme Court held that the Alabama court had been
‘misguided’ in looking for evidence that the transaction was actually in interstate
commerce. (Alafabco, supra, 539 U.S. at p. 56.) It held that the commerce clause power
could be exercised to preempt contrary state law ‘“in individual cases without showing
any specific effect upon interstate commerce” if in the aggregate the economic activity in
question would represent “a general practice . . . subject to federal control.” [Citations.]
Only that general practice need bear on interstate commerce in a substantial way.’ (Id. at
pp. 56-57.)” (Shepard, supra, 148 Cal.App.4th at pp. 1098-1099.)
The uncontroverted evidence shows defendants’ medical practice bears on
interstate commerce in a substantial way such that it falls within the scope of the Federal
Arbitration Act. Approximately 20 percent of the medical supplies were shipped from
out of state. Dr. Yoho declared some of the materials used for Ms. Parker’s liposuction
procedure originated from outside California. Defendants advertised on the internet and
communicated with out-of-state patients by telephone, mail and e-mail. About five
percent of defendants’ patients are from outside the state. Further, the medical practice
has contacts with out-of-state companies. Dr. Yoho stated: “My practice contracted (via
U.S. mail or the internet) with approximately 15 companies, insurance providers, entities
and/or other public or private corporations whose places of business are outside the State
10
of California. My practice regularly sends and/or receives letters, drafts, checks,
inquiries, and written and telephonic communications from outside of California, and
from various other states, which represents approximately 10% of all such
communications in my practice.” No doubt, the liposuction procedure was conducted in
California by a state licensed doctor on an in-state patient. But, there is a sufficient nexus
with interstate commerce to require enforcement of the three arbitration agreements
under the Federal Arbitration Act. (Marmet Health Care Center v. Brown (2012) 565
U.S. ___, ___ [132 S. Ct. 1201, 1203-1204] [wrongful death claims against nursing homes
are subject to Federal Arbitration Act]; Summit Health, Ltd. v. Pinhas (1991) 500 U.S.
322, 327-330 [ophthalmological services affect interstate commerce where physicians
served nonresident patients, received Medicare reimbursements, and generated revenues
from out-of-state sources]; Shepard, supra, 148 Cal.App.4th at pp. 1096, 1101 [a
residential purchase contract involved interstate commerce where the developer used five
different out-of-state building material suppliers even though virtually none of the
materials used came from other states]; Basura, supra, 98 Cal.App.4th at pp. 1214-1215
[two declarations established that construction materials were received from out-of-state
suppliers, non-California design professionals assisted in the project and advertising was
directed at other states].)
2. The venue and jurisdiction provisions do not displace the application of the Federal
Arbitration Act to this case
As noted, defendants argue that the section 1295, subdivision (c) 30-day rescission
period is preempted by the Federal Arbitration Act. By contrast, plaintiffs argue that the
Federal Arbitration Act is inapplicable because of alleged choice of law provisions in the
March 8, 2013, and August 14, 2013 contracts. For clarity’s purpose, we reiterate the
pertinent language: “I agree that any lawsuit or arbitration that is brought against Dr.
Yoho, his corporation, associates, or organization, will be tried in Pasadena, California
(the ‘venue’ is Los Angeles Superior Court in Pasadena, the ‘jurisdiction’ is the State
11
Court of California[])[.] Note, you have signed a binding arbitration contract and this
above applies to any court involvement that might be necessary for arbitration, or any
legal action that enters the courts.”
We respectfully disagree with plaintiffs. The foregoing language is not a generic
choice of law provision which places the present case outside the ambit of the Federal
Arbitration Act. The foregoing language is unlike choice of law provisions typically
found in disputes over whether an arbitration agreement is subject to enforcement under
either the California or Federal Arbitration Acts. (See Volt Information Sciences, Inc. v.
Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 470
[“‘[T]he Contract shall be governed by the law of the place where the Project is
located.’”] (Volt); Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal. 4th 376,
387 [“‘This agreement shall be construed and enforced in accordance with and governed
by the laws of the State of California, without giving effect to the conflict of laws
provisions thereof.’”] (Cronus Investments); Mount Diablo Medical Center v. Health Net
of California, Inc. (2002) 101 Cal. App. 4th 711, 716 [“‘The validity, construction,
interpretation and enforcement of this Agreement shall be governed by the laws of the
State of California.’”] (Mt. Diablo).) The Mt. Diablo opinion described the generic
choice of law provision there as broad, unqualified and all-encompassing. (Id. at p. 722;
see Security Ins. Co. of Hartford v. TIG Ins. Co. (2nd Cir. 2004) 360 F.3d 322, 328.)
Volt, Cronus Investments and Mt. Diablo involve a different arbitration issue--the scope
of a trial court’s duties under section 1281.2, subdivision (c). These cases illustrate the
potential effect of a generic choice of law provision on issues relating to the duty to
arbitrate and the application of Federal Arbitration Act to a particular arbitral dispute.
The language in the arbitration agreements in this case is far different from that in
Volt, Cronus Investments or Mt. Diablo. The agreements do not state that the arbitration
agreements’ enforcement are governed by California law. Rather, the language specifies
where any suit or arbitration will be litigated, which is a classic venue selection
provision. Thus, we review the enforceability of the 30-day rescission provision in
section 1295, subdivision (c) under the Federal Arbitration Act. Because of our
12
resolution of this issue, we need not discuss the effect of any of the federal decisions
which narrowly construe parties’ rights to opt out of various aspects of Federal
Arbitration Act coverage. (See Roadway Package System, Inc. v. Kayser (3rd Cir. 2001)
257 F.3d 287, 293-300 [requiring the parties’ contract evidence a “clear intent” to
displace the Federal Arbitration Act with Pennsylvania law]; Wolsey, Ltd. v. Foodmaker,
Inc. (9th Cir. 1998) 144 F.3d 1205, 1213 [“general choice-of-law clauses do not
incorporate state rules that govern the allocation of authority between courts and
arbitrators. . . .”]; Fidelity Federal Bank v. Durga Ma Corp. (9th Cir. 2004) 386 F.3d
1306, 1311-1312 [generic choice of law provision requiring the parties arbitrate in
accordance with this state’s laws did not evidence a “clear intent” to incorporate
California’s arbitration rules]; see Knight et al., Cal. Practice Guide: Alternative Dispute
Resolution (The Rutter Group 2015) ¶ 5:70.2, p. 59-60.)
C. Enforceability of the 30-day Rescission Right
Section 1295, subdivisions (a) through (c) contain three provisions which directly
relate to this appeal. Subdivisions (a)2 and (b)3 require the presence of certain language
2
Section 1295, subdivision (a) states: “Any contract for medical services which
contains a provision for arbitration of any dispute as to professional negligence of a
health care provider shall have such provision as the first article of the contract and shall
be expressed in the following language: ‘It is understood that any dispute as to medical
malpractice, that is as to whether any medical services rendered under this contract were
unnecessary or unauthorized or were improperly, negligently or incompetently rendered,
will be determined by submission to arbitration as provided by California law, and not by
a lawsuit or resort to court process except as California law provides for judicial review
of arbitration proceedings. Both parties to this contract, by entering into it, are giving up
their constitutional right to have any such dispute decided in a court of law before a jury,
and instead are accepting the use of arbitration.”’
3
Section 1295, subdivision (b) states: “Immediately before the signature line
provided for the individual contracting for the medical services must appear the following
in at least 10-point bold red type: [¶] ‘NOTICE: BY SIGNING THIS CONTRACT
YOU ARE AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRACTICE
13
in medical malpractice arbitration agreements and specified font and color requirements.
(Reigelsperger v. Siller (2007) 40 Cal. 4th 574, 578 (Reigelsperger); Titolo v. Cano
(2007) 157 Cal. App. 4th 310, 319.) The language, font, and color requirements specified
in subdivisions (a) and (b) are present in all three arbitration agreements executed by Ms.
Parker. The trial court found the arbitration agreement contained language required by
section 1295, subdivisions (a) and (b).
What is at issue is section 1295, subdivision (c), which states: “Once signed, such
a contract governs all subsequent open-book account transactions for medical services for
which the contract was signed until or unless rescinded by written notice within 30 days
of signature. Written notice of such rescission may be given by a guardian or conservator
of the patient if the patient is incapacitated or a minor.” (See Rodriguez, supra, 176
Cal.App.4th at pp. 1467-1472.) Our Supreme Court has held: “The purpose of section
1295 is to encourage and facilitate arbitration of medical malpractice disputes.
[Citations.] Accordingly, the provisions of section 1295 are to be construed liberally.”
(Reigelsperger, supra, 40 Cal.4th at p. 578; accord Ruiz v. Podolsky (2010) 50 Cal. 4th
838, 844.)
The trial court ruled the third arbitration agreement was unenforceable because
Ms. Parker died before the section 1295, subdivision (c) 30-day rescission period elapsed
pursuant to the holding in Rodriguez, supra, 176 Cal.App.4th at page 1469. We will
discuss Rodriguez later in this opinion. But the issue we resolve at present is whether, in
this case, the 30-day rescission provision is enforceable. As they did in the trial court,
defendants contend the section 1295, subdivision (c) 30-day rescission right is
unenforceable because the rescission right does not exist generally under California
contract law and applies only in connection with an arbitration. They argue that the
United States Supreme Court has held that such state laws which interfere with the
federally mandated policy favoring arbitration are unenforceable. We agree.
DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING UP YOUR
RIGHT TO A JURY OR COURT TRIAL. SEE ARTICLE 1 OF THIS CONTRACT.’”
14
In Allied-Bruce, supra, 513 U.S. at page 281, the United States Supreme Court
held: “States may regulate contracts, including arbitration clauses, under general contract
law principles and they may invalidate an arbitration clause ‘upon such grounds as exist
at law or in equity for the revocation of any contract.’ 9 U.S.C. § 2 (emphasis added).
What States may not do is decide that a contract is fair enough to enforce all its basic
terms (price, service, credit), but not fair enough to enforce its arbitration clause. The
[Federal Arbitration] Act makes any such state policy unlawful, for that kind of policy
would place arbitration clauses on an unequal ‘footing,’ directly contrary to the [Federal
Arbitration] Act’s language and Congress’ intent. See Volt Information Sciences, Inc.,
[supra,] 489 U.S.[] at [p.] 474.)” (See Cable Connection, Inc. v. DIRECTV, Inc. (2008)
44 Cal. 4th 1334, 1351.) In Doctor’s Associates the high court explained when a state law
applicable only to arbitration may be preempted as described in Perry v. Thomas (1987)
482 U.S. 483, 492, footnote 9: “In Perry, we reiterated: ‘[S]tate law, whether of
legislative or judicial origin, is applicable if that law arose to govern issues concerning
the validity, revocability, and enforceability of contracts generally. A state-law principle
that takes its meaning precisely from the fact that a contract to arbitrate is at issue does
not comport with [the text of § 2].’ [Citation].)” (Doctor’s Associates, supra, 517 U.S. at
p. 685; see Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC,
supra, 55 Cal.4th at p. 245 [“That is, the [Federal Arbitration Act] precludes judicial
invalidation of an arbitration clause based on state law requirements that are not generally
applicable to other contractual clauses, such as proof of actual notice, meaningful
reflection, signature by all parties, and/or a unilateral modification clause favoring the
nondrafting party.”].) Later in Perry, the United States Supreme Court explained, “A
court may not, then, in assessing the rights of litigants to enforce an arbitration
agreement, construe that agreement in a manner different from that in which it otherwise
construes nonarbitration agreements under state law.” (Perry v. Thomas, supra, 482 U.S.
at pp. 482-493, fn. 9; see Sonic-Calabasas A, Inc. v. Moreno (2011) 51 Cal. 4th 659, 688,
cert. grnted., judgment vacated Sonic-Calabasas A Inc. v. Moreno (2011) 563 U.S. __
[132 S. Ct. 496].)
15
In Doctor’s Associates, the Montana Supreme Court had held that an arbitration
clause in a franchise agreement was unenforceable because it failed to comply with a
statutory underscoring and pagination requirements. (Doctor’s Associates, supra, 517
U.S. at p. 684; see Sanchez v. Valencia Holding Co,. LLC (2015) 61 Cal. 4th 899, 914.)
The United States Supreme Court found Federal Arbitration Act preemption because the
underscoring and pagination requirements did not apply to other contracts. “Courts may
not, however, invalidate arbitration agreements under state laws applicable only to
arbitration provisions. See Allied-Bruce, [supra,] 513 U.S., at 281; Perry, 482 U.S., at
492, [f]n. 9. By enacting § 2, we have several times said, Congress precluded States from
singling out arbitration provisions for suspect status, requiring instead that such
provisions be placed ‘upon the same footing as other contracts.’ Scherk v. Alberto-
Culver Co., [(1974)] 417 U.S. 506, 511 (internal quotation marks omitted). Montana’s §
27-5-114(4) directly conflicts with § 2 of the [Federal Arbitration Act] because the
State’s law conditions the enforceability of arbitration agreements on compliance with a
special notice requirement not applicable to contracts generally. The [Federal Arbitration
Act] thus displaces the Montana statute with respect to arbitration agreements covered by
the [Federal Arbitration Act]. [Citation.]” (Doctor’s Associates, supra, 517 U.S. at p.
687; see Hedges v. Carrigan (2004) 117 Cal. App. 4th 578, 584-585.)
As they did in the trial court, defendants rely upon Basura, supra, 98 Cal.App.4th
at pages 1211-1212. At issue in Basura was section 1298.7 which states, “In the event an
arbitration provision is included in a contract or agreement covered by this title, it shall
not preclude or limit any right of action for bodily injury or wrongful death, or any right
of action to which Section 337.1 or 337.15 is applicable.” (Sections 337.1 and 337.15 set
forth the statutes of limitations for specified construction defect litigation.) Section
1298.7 is construed to permit a construction defect plaintiff to pursue a civil action even
though an arbitration agreement complying with section 1297, subdivision (a) through (c)
was executed. As explained in Basura: “With respect to the impact of section 1298.7,
Villa Milano explained: ‘[S]ection 1298.7 . . . provides that even when an arbitration
provision is included in an agreement to convey real property, “it shall not preclude or
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limit . . . any right of action to which . . . Section 337.1 or 337.15 is applicable.” . . .
[S]ections 337.1 and 337.15 pertain to litigation to recover damages for construction and
design defects. In other words, the net effect of section 1298.7 is to permit a purchaser to
pursue a construction and design defect action against the developer in court, even if the
purchaser signed an agreement to convey real property containing an arbitration clause.
[Citation.]’ (Villa Milano Homeowners Assn. v. Il Davorge [(2000)] 84 Cal.App.4th
[819,] 830, italics added, fns. omitted.)” (Basura, supra, 98 Cal. App.4th at pp. 1211-
1212; accord Shepard v. Edward Mackey Enterprises, Inc., supra, 148 Cal.App.4th at p.
1096.) The Basura court concluded; “Here, section 1298.7 directly conflicts with section
2 of the [Federal Arbitration Act] because the California statute is a state law applicable
only to arbitration agreements, allowing a purchaser to pursue a construction and design
defect action against a developer in court, despite having signed an agreement to convey
real property containing an arbitration clause.” (Basura, supra, 98 Cal. App.4th at p.
1212.)
Defendants also rely on Morrison, supra, 983 F.Supp. at pages 943-944, a case in
which the plaintiffs brought suit challenging medical care provided by defendants. At
issue was whether an arbitration agreement, which did not comply with text and format
requirements imposed by Colorado statutory law, was subject to Federal Arbitration Act
preemption. (Id. at p. 943.) The district court held the plaintiffs’ medical malpractice
related claims must be arbitrated: “The Colorado Uniform Arbitration Act, 13–22–210 et
seq., C.R.S., places no text or form limitations on arbitration agreements. Thus, the effect
of the [Colorado Health Care Availability Act] arbitration provisions §§ 13–64–403(3)
and (4) is to place arbitration clauses in medical services agreements in a class apart not
only from ‘any contract’ but also from all other arbitration agreements. By doing so, the
[Colorado Health Care Availability Act] ‘singularly limits their validity.’ Doctor’s
Assoc., 517 U.S. 681, 116 S.Ct. at 1657. I hold that the [Colorado Health Care
Availability Act] medical services arbitration provisions are ‘inconsonant’ with, and
therefore preempted by, the Federal Arbitration Act. . . . .” (Morrison, supra, 983 F.
Supp. at p. 943; see Allen v. Pacheco (Col. 2003) 71 P.3d 375, 382.)
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We agree with defendants. The 30-day rescission period does not apply to
California contracts generally. The general rescission statutes, Civil Code sections 1689
through 1695.17, provide no automatic 30-day right to rescind a contract after
performance by the other side. And here, the rescission right only exists in the context of
the provision of arbitration of medical care disputes. Because the 30-day rescission
period applies only in the context of arbitration of medical care disputes, it is preempted
by the Federal Arbitration Act. (AT&T Mobility LLC v. Concepcion (2011) 517 U.S.
333, 339; Doctor’s Associates, supra, 563 U.S. at p. 687.)
D. Rodriguez
We now turn to plaintiffs’ contention based upon Rodriguez. In Rodriguez, the
decedent executed a physician-patient arbitration agreement four days before her
gallbladder surgery. (Rodriguez, supra, 176 Cal.App.4th at pp. 1464-1465.) The
decedent died during the recovery period allegedly from a nick to her liver the surgeon
made during the procedure. (Id. at p. 1465.) The decedent’s minor child sued the
surgeon and others for wrongful death. (Ibid.) The surgeon moved to compel arbitration.
The trial court granted the petition to compel arbitration. (Id. at p. 1466.) Plaintiff filed a
mandate petition which was granted by the Division Seven of this appellate district. (Id.
at p. 1464.)
The Court of Appeal held the arbitration agreement was unenforceable because
there was no valid waiver of the right to a jury trial. (Rodriguez, supra, 176 Cal.App.4th
at p. 1469.) Our Division Seven colleagues explained: “[Decedent] was presented with
the Arbitration Agreement only four days before her scheduled surgery under
circumstances in which she could have believed she must sign the agreement in order to
have [defendant surgeon] perform the surgery. There is no evidence that she would or
would not have reread and reconsidered the Arbitration Agreement after her surgery or
that she would or would not have exercised her right to ‘revoke’ the agreement within the
statutory 30-day revocation period. [Citation.] [Decedent] signed the Arbitration
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Agreement herself, not through someone authorized to do so on her behalf, and, hence,
the determinative factor is [decedent’s] intent, not the intent of some representative
appointed after her death. [Citation.] [Decedent’s] death shortly after the initial surgery
rendered it impossible to make any evidentiary finding regarding whether [decedent’s]
alleged waiver of her rights, not to mention the child’s rights, to a jury trial was knowing
and voluntary. [Decedent’s] death prior to the expiration of the 30-day ‘cooling off’
period also made it impossible for full compliance with section 1295 requirements. A
statutory prerequisite to an enforceable arbitration agreement under section 1295 is that
the person signing the agreement must have 30 days to review the agreement and
reconsider whether he or she knowingly and voluntarily intends to waive the right to a
jury trial or, alternatively, desires to rescind the agreement. (§ 1295, subd. (c).) Thus,
[decedent’s] death prior to the expiration of the 30-day period rendered it impossible to
establish that an arbitration agreement exists that is enforceable under section 1295.
Given the foregoing facts, we conclude that [defendant surgeon] would be unable to carry
his burden of proving that an agreement exists. [Citation.]” (Rodriguez v. Superior
Court, supra, 176 Cal.App.4th at pp. 1469-1470.)
In Rodriguez there was no issue concerning preemption by the Federal Arbitration
Act. By contrast, here defendants have made a specific factual showing as to why the
transaction involves interstate commerce. Our Supreme Court has explained:
“‘Language used in any opinion is of course to be understood in the light of the facts and
the issue then before the court, and an opinion is not authority for a proposition not
therein considered. [Citation.]’ (Ginns v. Savage (1964) 61 Cal. 2d 520, 524, fn. 2.)”
(Elisa B. v. Superior Court (2005) 37 Cal. 4th 108, 118.) The analysis concerning the 30-
day rescission right in Rodriguez has no bearing on the preemption issue presented here.
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IV. DISPOSITION
The order denying the motions to compel arbitration is reversed. Defendants,
Robert A. Yoho, M.D. and New Body Cosmetic Surgery Center, shall recover their costs
on appeal from plaintiffs: Vivian Scott, individually and as guardian ad litem for D.G., a
minor; S.T., minor, by and through his guardian ad litem, Robert Lee Turner Jr.; and
La’Joyce King.
CERTIFIED FOR PUBLICATION
TURNER, P. J.
We concur:
KRIEGLER, J.
KUMAR, J.*
*
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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