Shechter v. Alta Hospitals System, LLC CA2/7 ( 2021 )

Filed 7/21/21 Shechter v. Alta Hospitals System, LLC CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
PAGIEL SHECHTER et al., B304480
Plaintiffs and Respondents, (Los Angeles County
v. Super. Ct. No.
19STCV30907)
ALTA HOSPITALS SYSTEM,
LLC et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of
Los Angeles County, Elizabeth Allen White, Judge. Affirmed.
Ballard Rosenberg Golper & Savitt, Linda Miller Savitt,
Eric C. Schwettmann and John J. Manier for Defendants and
Appellants Alta Hospitals System, LLC, Southern California
Healthcare System, Inc., David R. Topper, Kathleen Mello-
Navejas, Michael Klepin and Kathren Alkasspooles.
Khouri Law Firm, Michael J. Khouri and Michael Tran for
Plaintiffs and Respondents Pagiel Shechter and Pagiel
Shechter, M.D., Inc.
Alta Hospitals System, LLC (Alta), Southern California
HealthCare System, Inc. (SCHS), David R. Topper, Kathleen
Mello-Navejas, Michael Klepin and Kathren Alkasspooles
(collectively hospital defendants) petitioned the superior court to
compel arbitration of the claims asserted by Dr. Pagiel Shechter
and his medical corporation, Pagiel Shechter, M.D., Inc.,
(collectively Shechter plaintiffs) in a complaint alleging breach of
contract, unlawful retaliation, intentional interference with
prospective economic advantage and unlawful business practices.
The court denied the petition. Because the hospital defendants
failed to demonstrate the dispute arose out of the agreement that
contained the arbitration clause, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Complaint
According to the allegations in the Shechter plaintiffs’
complaint, Dr. Shechter is a medical doctor with a specialty in
nephrology and the owner of Pagiel Shechter, M.D., Inc., the
medical corporation “through which [he] practices medicine.”
Alta and SCHS own several hospitals throughout
Los Angeles County, including Southern California Hospital in
Culver City (SCHS Culver City). Topper and Mello-Navejas are
owners, officers, directors or managing agents of SCHS and/or
Alta; Klepin is the chief executive officer of SCHS Culver City;
1
and Alkasspooles is a vice president at SCHS and Alta.
The complaint alleged causes of action for breach of
contract, unlawful retaliation in violation of Health and Safety
1
The complaint also named Jamshid Niknam, Martha
Nishinaka and Rajendra Prasad as defendants. They did not
seek arbitration.
2
Code section 1278.5, intentional interference with prospective
economic advantage and unlawful business practices in violation
of Business and Professions Code section 17200.
In support of their breach of contract claim the Shechter
plaintiffs alleged that Topper and Mello-Navejas approached
Dr. Shechter on behalf of SCHS/Alta in 2008 to obtain his
agreement to move his medical practice to Brotman Memorial
Medical Center in Culver City, the predecessor-in-interest to
SCHS Culver City. In return, SCHS and Alta promised to
(1) grant Dr. Shechter an exclusive contract to provide acute
dialysis services to patients at Brotman and at each SCHS
hospital campus; (2) designate Dr. Shechter as the preferred
nephrologist at Brotman and all SCHS hospital campuses; and
(3) place Dr. Shechter on the emergency room panel at least
four times a month at other SCHS hospital campuses. In
reliance on these oral promises, in 2009 Dr. Shechter moved his
practice to Brotman, incurring substantial financial obligations
in the process. Although Brotman provided Dr. Shechter with an
acute dialysis services contract (the IRCAD dialysis agreement),
other promises Topper and Mello-Navejas had made were not
honored, including designating Dr. Shechter SCHS’s preferred
nephrologist at all SCHS campuses. In addition, although he was
placed on the emergency room panel within months after arriving
at Brotman, Dr. Shechter’s participation on the panel was
2
gradually reduced and then eliminated.
2
In paragraph 31 of their complaint the Shechter plaintiffs
alleged, “Defendants failed to perform their obligations under the
oral contract in a number of ways. Plaintiff was not placed on the
ER panel at least four times a month; was not the preferred
3
In support of their unlawful retaliation claim the Shechter
plaintiffs alleged that Dr. Shechter complained to staff and
officers at SCHS Culver City several times in 2018 about the
hospital’s substandard quality of care, including its practice of
prematurely discharging patients. Instead of addressing these
complaints, SCHS, Alta, Topper, Klepin and Niknam retaliated
against Shechter by falsely claiming he suffered from an anger
management problem and requiring him to seek psychiatric
treatment in order to practice at SCHS, effectively suspending
him from SCHS Culver City.
In support of their claims for unfair business practices and
intentional interference with prospective economic advantage,
the Shechter plaintiffs alleged the hospital defendants engaged in
actions designed to disrupt Dr. Shechter’s economic relationships
with other hospitals and physicians, including by making false,
unfounded and potentially defamatory complaints against him.
In addition, Alkasspooles and Mello-Navejas, acting on behalf of
SCHS and Alta, convinced Dr. Shechter’s long-time office
manager to leave Dr. Shechter’s employ and work for a competing
physician with the effect of “stealing” his patients and depriving
him of anticipated income.
2. The Hospital Defendants’ Petition To Compel Arbitration
of Each Cause of Action in the Complaint
After answering the complaint on November 6, 2019, on
December 16, 2019 the hospital defendants petitioned to compel
arbitration of all claims in the complaint. In their moving papers
the hospital defendants presented evidence of an acute dialysis
services agreement dated March 12, 2010 between Brotman, on
nephrologists for all patients at Southern California Hospitals;
and was not given an acute dialysis contract with Alta/SCHS.”
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the one hand, and Intensive Renal Care Acute Dialysis (IRCAD),
a corporation wholly owned by Dr. Shechter, on the other hand.
Dr. Shechter signed the agreement on behalf of IRCAD.
According to the terms of the agreement, IRCAD was to provide
Brotman with registered nurses and duly licensed technicians for
the provision of acute dialysis services. The one-year agreement
was amended and renewed eight times, the latest occurring on
November 27, 2017 between IRCAD and SCHS.
The original IRCAD dialysis agreement contained an
arbitration provision, which remained unchanged in each of the
subsequent amendments/renewals. It provided, “Any dispute or
controversy arising under, out of or in connection with, or in
relation to this Agreement, or any amendment hereof, or in the
breach hereof shall be determined and settled by arbitration in
Los Angeles County, California, in accordance with the American
Health Lawyers Association Alternative Dispute Resolution
Service Rules of Procedure for Arbitration and applying the laws
of the State. Any award rendered by the arbitrator shall be final
and binding upon each of the parties, and judgment thereon may
be entered in any court having jurisdiction thereof.”
The IRCAD dialysis agreement stated it “contains the
entire understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements, oral or
written, and all other communications between the parties
relating to such subject matter” and “shall inure to the benefit of
and be binding upon the parties herein and their respective heirs,
representatives, successors and permitted assigns.”
In their petition to compel arbitration the hospital
defendants asserted, without explanation, each of the Shechter
plaintiffs’ causes of action arose from the IRCAD dialysis
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agreement. Although SCHS was the only one of the hospital
defendants to sign the renewed agreement, the hospital
defendants argued each of them could enforce the arbitration
provision: Alta and SCHS were both successors-in-interest to
Brotman, which had signed the original agreement; and Topper,
Mello-Navejas, Klepin and Alkasspooles were agents and
representatives of SCHS and Alta, as the complaint alleged. In
addition, while recognizing Dr. Shechter signed the IRCAD
dialysis agreement on behalf of IRCAD, and IRCAD was not a
party to the lawsuit, the hospital defendants argued
Dr. Shechter, Pagiel Shechter, M.D., Inc. and IRCAD were “one
and the same.” They requested the court take judicial notice of
documents filed with the Secretary of State reflecting that
Dr. Shechter was the sole owner and shareholder of both Pagiel
Shechter, M.D., Inc. and IRCAD.
The Shechter plaintiffs refused the hospital defendants’
informal request to arbitrate, did not file any response to the
hospital defendants’ petition to compel arbitration and did not
appear at the hearing on the petition.
3. The Court’s Ruling Denying the Petition To Compel
Arbitration
After granting the hospital defendants’ request for judicial
notice of the documents filed with the Secretary of State, the
court denied their petition to compel arbitration. Because the
Shechter plaintiffs were not parties to the IRCAD dialysis
agreement and none of the causes of action was “inextricably
intertwined” with that contract, the court ruled, the hospital
defendants could not use that agreement as the basis to compel
arbitration.
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DISCUSSION
1. Governing Law and Standard of Review
Code of Civil Procedure section 1281.2 requires the trial
court to order arbitration of a controversy “[o]n petition of a party
to an arbitration agreement alleging the existence of a written
agreement to arbitrate a controversy and that a party to the
agreement refuses to arbitrate such controversy . . . if it
determines that an agreement to arbitrate the controversy
exists.” As the language of this section makes plain, the
threshold question presented by every petition to compel
arbitration is whether an agreement to arbitrate exists.
(American Express Co. v. Italian Colors Restaurant (2013)
570 U.S. 228, 233 [it is an “overarching principle that arbitration
is a matter of contract”]; Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc. (1985) 473 U.S. 614, 626 [“the first task
of a court asked to compel arbitration of a dispute is to determine
whether the parties agreed to arbitrate that dispute”]; Pinnacle
Museum Tower Assn. v. Pinnacle Market Development (US), LLC
(2012) 55 Cal.4th 223, 236 (Pinnacle) [“‘“a party cannot be
required to submit to arbitration any dispute which he has not
agreed so to submit”’”]; Bautista v. Fantasy Activewear, Inc.
(2020) 52 Cal.App.5th 650, 656 [“[u]nder both federal and state
law, the threshold question presented by a petition to compel
arbitration is whether there is an agreement to arbitrate,”
internal quotation marks and italics omitted]; Esparza v. Sand &
Sea, Inc. (2016) 2 Cal.App.5th 781, 787 [“[t]here is a strong public
7
policy favoring contractual arbitration, but that policy does not
3
extend to parties who have not agreed to arbitrate”].)
The party seeking to compel arbitration bears the burden of
proving by a preponderance of the evidence an agreement to
arbitrate a dispute exists. (Pinnacle, supra, 55 Cal.4th at p. 236;
Rosenthal v. Great Western Fin. Securities Corp. (1996)
14 Cal.4th 394, 413 (Rosenthal); Tiri v. Lucky Chances, Inc.
(2014) 226 Cal.App.4th 231, 240; see generally Lindemann v.
Hume (2012) 204 Cal.App.4th 556, 568 [“‘the scope of arbitration
“is, of course, a matter of agreement between the parties”’”].) If
an agreement to arbitrate exists, the burden shifts to the party
refusing arbitration to demonstrate the agreement is
unenforceable. (Rosenthal, at p. 413; Engalla v. Permanente
Medical Group, Inc. (1997) 15 Cal.4th 951, 972; see AT&T
Mobility LLC v. Concepcion (2011) 563 U.S. 333, 339 [section 2 of
3
The hospital defendants assert this action involves
interstate commerce and is therefore governed by the Federal
Arbitration Act (FAA) (9 U.S.C. § 1 et seq.). Even if the FAA
applies, an issue we do not resolve, the question whether an
agreement to arbitrate a particular controversy exists is governed
by state law. (See First Options of Chicago, Inc. v. Kaplan (1995)
514 U.S. 938, 944 [“[w]hen deciding whether the parties agreed to
arbitrate a certain matter . . . [courts] generally should apply
ordinary . . . principles that govern the formation of contracts”];
McGill v. Citibank, N.A. (2017) 2 Cal.5th 945, 961-962 [rejecting
argument that FAA preempts state contract principles; the
question whether an agreement has been formed to arbitrate a
particular dispute is one of contract interpretation under state
law]; see generally E.E.O.C. v. Waffle House, Inc. (2002) 534 U.S.
279, 289 [FAA simply reverses judicial hostility to arbitration
agreements by placing them on same footing as any other
contract].)
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the FAA “permits arbitration agreements to be declared
unenforceable ‘upon such grounds as exist at law or in equity for
the revocation of any contract’”].)
We review de novo the superior court’s interpretation of an
arbitration agreement, including the scope of the agreement,
when, as here, that interpretation does not depend on the
resolution of conflicting extrinsic evidence. (Pinnacle, supra,
55 Cal.4th at p. 236; Victrola 89, LLC v. Jaman Properties 8 LLC
(2020) 46 Cal.App.5th 337, 355 (Victrola 89); DMS Services, LLC
v. Superior Court (2012) 205 Cal.App.4th 1346, 1352.) In light of
the public policy favoring arbitration, any doubt as to whether a
claim falls within the arbitration clause is to be resolved in favor
of arbitration. (Victrola 89, at p. 356.)
2. The Hospital Defendants Failed To Demonstrate the
Dispute Arose from the Agreement Containing the
Arbitration Provision
The hospital defendants contend they carried their burden
to demonstrate the existence of a valid arbitration agreement
between SCHS and/or its predecessor-in-interest, on the one
hand, and Dr. Shechter, on the other hand. That Dr. Shechter
signed the IRCAD dialysis agreement on behalf of IRCAD, and
not himself or his medical corporation, they assert, is immaterial
because he is the sole owner and shareholder of both
corporations. And, in any event, they argue, the claims pleaded
in the Shechter plaintiffs’ complaint are inextricably intertwined
with the IRCAD dialysis agreement, precluding the Shechter
plaintiffs under the doctrine of equitable estoppel from denying
the existence of the agreement to arbitrate contained in that
contract. (See DMS Services, LLC v. Superior Court, supra,
205 Cal.App.4th at p. 1357 [plaintiff who has not signed
9
arbitration agreement may nonetheless be compelled to arbitrate
when his or her claims rely on, and are inextricably intertwined
with, the agreement containing the arbitration provision]; JSM
Tuscany, LLC v. Superior Court (2011) 193 Cal.App.4th 1222,
1242 [same].)
The hospital defendants’ arguments relating to their
standing to enforce the arbitration provision as agents or third
party beneficiaries of the IRCAD dialysis agreement, and to the
Shechter plaintiffs’ inability under the doctrine of equitable
estoppel to disclaim an agreement on which they allegedly rely to
support their claims, miss the mark. Even if each of the hospital
defendants could enforce the arbitration provision, the question
remains whether the dispute falls within the scope of that
provision. The hospital defendants assert it does, but made no
effort, either in the trial court or on appeal, to connect any of the
claims in the complaint with the IRCAD dialysis agreement.
As pleaded, none of the Shechter plaintiffs’ causes of action
relates to the IRCAD dialysis agreement. The breach of contract
cause of action concerns the breach of oral promises SCHS and its
representatives made to Dr. Shechter to induce him to move his
medical practice to Brotman. That one of those promises was to
grant an acute dialysis services contract is beside the point.
There is no claim the terms of the IRCAD dialysis contract were
breached. To the extent the Shechter plaintiffs allege the
hospital defendants failed to offer contracts to provide acute
dialysis services at all SCHS campuses, not just at Brotman, it is
the alleged breach of the oral promise, not any of the terms of the
IRCAD dialysis agreement, that forms the basis of that claim.
Nor do the allegations in any of the other causes of action—
unlawful retaliation, unfair business practices and interference
10
with prospective economic advantage—refer, relate to or arise out
of the agreement to provide acute dialysis services through
IRCAD, a corporate entity separate from Dr. Shechter’s medical
practice.
Perhaps recognizing this disconnect between their petition
and the complaint, the hospital defendants contend it was the
Shechter plaintiffs’ burden, as the parties opposing arbitration, to
demonstrate their claims fell outside the scope of the arbitration
agreement. Relying on oft-cited language that the “‘party
opposing arbitration has the burden of demonstrating that an
arbitration clause cannot be interpreted to require arbitration of
a dispute’” (Victrola 89, supra, 46 Cal.App.5th at p. 356; accord,
Rice v. Downs (2016) 248 Cal.App.4th 175, 185), the hospital
defendants contend that, because the Shechter plaintiffs did not
file an opposition to the petition or attend the hearing, they
forfeited any right to object the agreement does not cover the
disputes in question.
The hospital defendants misapprehend the parties’
respective burdens. The party seeking to compel arbitration
bears an initial burden to make a prima facie showing the claims
asserted in the complaint are covered by a valid agreement to
arbitrate. (Rosenthal, supra, 14 Cal.4th at p. 413; Molecular
Analytical Systems v. Ciphergen Biosystems, Inc. (2010)
186 Cal.App.4th 696, 710-711.) “‘In determining whether an
arbitration agreement applies to a specific dispute, the court may
examine only the agreement itself and the complaint filed by the
party refusing arbitration.’” (Laymon v. J. Rockliff, Inc. (2017)
12 Cal.App.5th 812, 819; accord, Rice v. Downs, supra,
248 Cal.App.4th at pp. 184-185.) When that prima facie showing
has been made, the court must compel arbitration unless the
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party opposing arbitration demonstrates the dispute falls outside
the scope of the agreement. (Laymon, at p. 820; see Molecular
Analytical, at pp. 710-711 [where “defendants made a sufficient
prima facie showing of an agreement to arbitrate, based not only
on the allegations of the complaint but also on their moving
papers and on their proffer of the [arbitration] [a]greement,” the
burden was on the party resisting arbitration to demonstrate its
4
claims were not arbitrable].)
The hospital defendants never carried their initial burden.
As discussed, there was no effort to demonstrate the Shechter
plaintiffs’ claims arose out of the IRCAD dialysis agreement.
Instead, the hospital defendants attempted to show that
Dr. Shechter, his medical corporation and IRCAD were all
effectively the same entity by providing documents filed with the
Secretary of State reflecting that Dr. Shechter owned both
IRCAD and Pagiel Shechter, M.D., Inc. However, no evidence
4
Although parties may delegate to the arbitrator the
question of arbitrability—whether an arbitration agreement
governs a particular dispute—(Henry Schein, Inc. v. Archer &
White Sales, Inc. (Jan. 8, 2019, No. 17-1272) __ U.S. __ [139 S.Ct.
524, 527; 202 L.Ed.2d 480]; Rent-A-Center, West, Inc. v. Jackson
(2010) 561 U.S. 63, 68-70), the hospital defendants do not argue,
nor do the arbitration agreement and the American Health
Lawyers Association Alternative Dispute Resolution Service
Rules of Procedure for Arbitration (arguably incorporated by
reference in the acute dialysis services agreement) make clear,
that the parties intended for the arbitrator, rather than the
court, to decide questions of arbitrability. (See Schein, at p. 531
[“courts ‘should not assume that the parties agreed to arbitrate
arbitrability’” absent “‘clear and unmistakable evidence’” of that
intent in the agreement]; First Options of Chicago, Inc. v. Kaplan,
supra, 514 U.S. at p. 944 [same].)
12
was submitted that Dr. Shechter conducted his medical practice
through IRCAD. If anything, the judicially noticed documents
merely confirmed Dr. Shechter owned and operated two distinct
corporations, one of which entered into the acute dialysis services
agreement while the other sued the hospital defendants for
5
unrelated causes of action.
In their reply brief the hospital defendants assert SCHS’s
acute dialysis services agreement with IRCAD comprises “the
only business relationship” between Dr. Shechter and SCHS and
thus the broad arbitration provision in the IRCAD contract must
necessarily relate to all of Dr. Shechter’s claims against SCHS
and its agents and representatives. To the extent that is the
case, the hospital defendants should have included with their
petition supporting declarations explaining SCHS’s relationship
with IRCAD and the IRCAD contract’s connection to the causes of
action in the complaint. They did not. Because the hospital
defendants failed to carry their initial burden to demonstrate the
claims asserted in the complaint related to, were connected with,
or arose out of the IRCAD dialysis contract, the court did not err
in denying their petition to compel arbitration.
5
The Articles of Incorporation for Pagiel Shechter, M.D., Inc.
provide its purpose “is to engage in the PROFESSION of
Medicine and any other lawful activities.” The Articles of
Incorporation for IRCAD provide IRCAD’s purpose “is to engage
in any lawful act or activity for which a corporation may be
organized under the GENERAL CORPORATION LAW of
California.”
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DISPOSITION
The order denying the petition of SCHS, Alta, Topper,
Mello-Navejas, Klepin and Alkasspooles to compel arbitration is
affirmed. Dr. Shechter and Pagiel Shechter, M.D., Inc. are to
recover their costs on appeal.
PERLUSS, P. J.
We concur:
FEUER, J.
*
McCORMICK, J.
*
Judge of the Orange County Superior Court, assigned by
the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
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