PIH Health Hospital-Whittier v. Cigna Healthcare of Cal. CA2/4

Filed 3/22/23 PIH Health Hospital-Whittier v. Cigna Healthcare of Cal. CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
PIH HEALTH HOSPITAL- B320294
WHITTIER et al.,
(Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. 20NWCV00666)
v.
CIGNA HEALTHCARE OF
CALIFORNIA, INC., et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los
Angeles County, Olivia Rosales, Judge. Affirmed.
Hinshaw & Culbertson and Robert C. Bohner for
Defendants and Appellants.
Payne & Fears, C. Darryl Cordero, Damon Rubin, and
Scott O. Luskin, for Plaintiffs and Respondents.
INTRODUCTION
In the proceedings below, appellants Cigna Healthcare
of California, Inc. (Cigna California), Cigna Health and Life
Insurance Company (Cigna Life), and Connecticut General
Life Insurance Company (Connecticut General) (collectively,
Cigna) moved to compel arbitration of claims brought by
respondents PIH Health Hospital-Whittier (PIH Whittier)
and PIH Health Hospital-Downey (PIH Downey)
(collectively, PIH). The trial court denied the motion under
the third-party litigation exception set forth in Code of Civil
Procedure section 1281.2, subdivision (c) (section 1281.2(c)).
On appeal, Cigna contends the court erred because there
were no third parties within the meaning of section
1281.2(c), and because there was no possibility of conflicting
rulings between the arbitrable and non-arbitrable causes of
action. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. PIH Files a Complaint
PIH Whittier and PIH Downey are hospitals, Cigna
California is a health care service plan, and Cigna Life and
Connecticut General are health insurers. On November 20,
2020, PIH sued Cigna, alleging that Cigna had failed to pay
for services PIH provided to Cigna’s insureds, damaging PIH
by at least $11,125,630. The complaint included boilerplate
alter ego and agency allegations that Cigna California,
Cigna Life, and Connecticut General “have common
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ownership and control, and coordinate operations to the
extent that their separate corporate forms are illusory,” and
that “at all relevant times, Defendants, and each of them,
have consolidated and coordinated operations, were the
agents and employees of each other and were acting within
the scope and purpose of their agency and employment, and
each Defendant has ratified the acts of his, her or its agents
and employees.”1 The complaint set forth ten causes of
action.
In the first three causes of action for “Breaches of
Written Contract,” PIH alleged the existence of three
agreements: an agreement between PIH Whittier and Cigna
California (Whittier-California Agreement), an agreement
between PIH Downey and Connecticut General, and an
agreement between PIH Downey and all three Cigna
defendants (Downey-Cigna Agreement). PIH claimed each
agreement required the Cigna entity or entities to pay the
PIH entity for services rendered while the contract was in
effect, and for “covered services” after it terminated. PIH
asserted that all three agreements had terminated on
August 1, 2019, and that Cigna had breached the
agreements by failing to pay, or by underpaying, a total of
$2,020,598 for services that PIH provided.
In the fourth and fifth causes of action for “Breaches of
Implied Contract,” PIH alleged the existence of an implied
contract with Cigna requiring Cigna to pay the reasonable
1 In their Answer, Cigna expressly denied these allegations.
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value of emergency medical services the hospitals provided
to Cigna insureds after the parties’ agreements terminated.
PIH claimed that Cigna underpaid PIH Whittier by
$6,849,498, and PIH Downey by $2,225,532.
In the sixth and seventh causes of action for “Recovery
for Services Rendered,” PIH sought to recover from Cigna
the value of the services the hospitals provided to Cigna’s
insureds after the parties’ agreements terminated, in the
amount of $6,849,498 for PIH Whittier and $2,255,532 for
PIH Downey.
In the eighth cause of action for “Intentional Violation
of Duty to Pay for Medical Services,” PIH alleged Cigna
intentionally failed to pay PIH for services rendered, despite
statutes requiring such payment, in the amount of
$9,105,030.
In the ninth and tenth causes of action for “Violation of
Business and Professions Code Section 17200,” PIH alleged
Cigna’s actions, including “systematically failing to pay,
underpaying, or delaying payment to Plaintiffs” and “failing
to provide the specific basis for denying all or part of the
claims at issue in this lawsuit,” constituted unfair
competition.
B. Cigna Moves to Compel Arbitration
On December 3, 2020, Cigna removed the case to
federal court. On August 26, 2021, the federal court granted
PIH’s motion for remand and returned the case to state
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court. One month later, on September 22, 2021, Cigna
moved to compel arbitration.
The Whittier-California Agreement provided that “all
claims and controversies arising out of or in connection with
this Agreement shall be subject to binding arbitration . . . by
a single arbitrator in accordance with the commercial
arbitration rules of the American Arbitration Association
(‘AAA’) or the existing Rules of Practice and Procedures of
the Judicial Arbitration and Mediation Services, Inc.
(‘JAMS’). . . . The party filing the arbitration shall have the
right to select either AAA or JAMS.” The Downey-Cigna
Agreement provided that “Arbitration shall be the exclusive
remedy for resolution of disputes arising under the
Agreement.” The Downey-Cigna Agreement also provided,
however, that the arbitration would be conducted under the
rules of the “American Health Lawyers Association
Alternative Dispute Resolution Service.” Cigna alleged
these two arbitration clauses encompassed all of PIH’s
causes of action because “all ten of Plaintiffs’ causes of action
involve claims, controversies and disputes arising under the
Agreements.”
On December 8, 2021, PIH opposed the motion,
arguing that, because neither Cigna Life nor Connecticut
General was a party to the Whittier-California Agreement,
PIH Whittier had never agreed to arbitrate with those two
entities. PIH also contended that Cigna had waived
whatever right it had to arbitration by litigating the case for
ten months in federal court without filing a motion to compel
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arbitration, and that this delay prejudiced PIH because
Cigna had propounded broad discovery that would have
required arbitrator approval.
On December 14, 2021, Cigna replied, reiterating that
PIH’s causes of action were within the scope of the
arbitration clauses. Regarding PIH’s contention of waiver,
Cigna explained its failure to file a motion to compel sooner
by noting that PIH had moved for remand a month after
removal to federal court and, “[u]ntil the federal court ruled
on that motion [which it granted on August 16, 2021], the
parties could not know whether the federal court had
jurisdiction to rule on a motion to compel arbitration.” Cigna
also claimed PIH failed to demonstrate prejudice.
Cigna made no mention of alter ego or agency in either
its moving or reply papers. At oral argument, however,
Cigna’s counsel argued that all of the Cigna entities “were
affiliated and they can enforce the arbitration agreements
even though some of the parties might not be subject to one
of the agreements that has an arbitration provision.”
On February 4, 2022, the court denied Cigna’s motion.
It found that certain “causes of action may be subject to
arbitration: the first cause of action in full; the third cause of
action in full; the fourth cause of action as alleged against
defendant Cigna California only, leaving . . . PIH Whittier,
Connecticut General, and Cigna Life to litigate this claim in
court; the fifth cause of action in its entirety; the eighth
cause of action asserted by PIH Downey against all
Defendants; and the eighth cause of action asserted by PIH
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Whittier against only Cigna California, leaving PIH
Whittier, Connecticut General, and Cigna Life to litigate this
cause of action in court.” It found the other claims were not
subject to arbitration. Because the court determined that
compelling arbitration on the controversies subject to
arbitration would create the potential for conflicting rulings,
it denied the motion under section 1281.2(c). Cigna timely
appealed.
DISCUSSION
The third-party litigation exception permits a court to
refuse to compel arbitration of a controversy that is within
the scope of a valid arbitration agreement if “it determines
that: . . . (c) A party to the arbitration agreement is also a
party to a pending court action or special proceeding with a
third party, arising out of the same transaction or series of
related transactions and there is a possibility of conflicting
rulings on a common issue of law or fact.” (Code Civ. Proc.,
§ 1281.2, subd. (c); see also Acquire II, Ltd. v. Colton Real
Estate Group (2013) 213 Cal.App.4th 959, 967–968.)
Cigna contends the trial court erred in finding the
third-party litigation exception applicable here because none
of the Cigna entities constituted a “third party” under
section 1281.2(c), and because there was no possibility of
conflicting rulings. We disagree.
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A. The Court Did Not Err in Finding There
Were Third Parties
For purposes of section 1281.2, “a third party is one
who is neither bound by nor entitled to enforce the
arbitration agreement.” (Daniels v. Sunrise Senior Living,
Inc. (2013) 212 Cal.App.4th 674, 679.) Cigna argues that,
because PIH accused each Cigna entity in the complaint of
being an alter ego and agent of the other entities, each Cigna
entity may enforce the arbitration agreements, and thus no
Cigna entity is a “third party” within the meaning of section
1281.2(c). Cigna additionally contends that PIH’s alter ego
and agency allegations estop PIH from denying that each
Cigna entity is an alter ego and agent of each other.
Because Cigna failed to raise these arguments
sufficiently before the trial court, we find them forfeited.
Even if Cigna had not forfeited these arguments, we would
find Cigna failed to demonstrate that Cigna Life and
Connecticut General could enforce an arbitration agreement
against PIH Whittier and that the trial court did not err in
concluding that there were “third part[ies]” within the
meaning of section 1281.2(c).
1. Cigna Has Forfeited Its Arguments
“‘“‘Generally, issues raised for the first time on appeal
which were not litigated in the trial court are waived.’”’”
(Premier Medical Management Systems, Inc. v. California
Ins. Guarantee Assn. (2008) 163 Cal.App.4th 550, 564.)
Cigna contends it raised its alter ego and agency arguments
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below. While Cigna admits it did not make these arguments
“by those specific names,” it asserts it “did argue generally
that the way in which PIH alleged its claims against Cigna
as affiliated and related entities subjected those claims to
arbitration.” In support of its position, Cigna cites to a
comment its counsel made at oral argument on the motion to
compel that the Cigna entities “were affiliated, and they can
enforce the arbitration agreements even though some of the
parties might not be subject to one of the agreements that
has an arbitration provision.” Counsel for PIH objected at
the time to Cigna raising this point for the first time at oral
argument.
We hold that what Cigna’s counsel said at oral
argument was insufficient to preserve for appeal the
argument Cigna now makes that all the Cigna entities were
alter egos and agents for purposes of enforcing the
arbitration provisions. Cigna’s counsel argued the parties
were “affiliated,” not that they were alter egos or agents.
Moreover, “[n]ew issues cannot generally be raised for the
first time in oral argument.” (New Plumbing Contractors,
Inc. v. Nationwide Mutual Ins. Co. (1992) 7 Cal.App.4th
1088, 1098.) “‘Appellate courts are loath to reverse a
judgment on grounds that the opposing party did not have
an opportunity to argue and the trial court did not have an
opportunity to consider.’” (Mendoza v. Trans Valley
Transport (2022) 75 Cal.App.5th 748, 769.) Here, we are
loath to disturb the decision of the trial court based on a
theory that Cigna did not present for the court to consider.
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2. Cigna Has Failed to Demonstrate Each
Cigna Entity Could Enforce the
Arbitration Agreements
Cigna contends that we have discretion to consider an
issue first raised on appeal when that issue is “a question of
law applied to undisputed facts in the record.” (RN Solution,
Inc. v. Catholic Healthcare West (2008) 165 Cal.App.4th
1511, 1518 [while appellate courts generally will not
consider issues raised for the first time on appeal, exception
exists “where the new theory ‘presents a question of law to
be applied to undisputed facts in the record’”]; ibid.[“Whether to apply this exception lies within the appellate
court’s discretion”].) While we see no reason to exercise this
discretion here, were we to do so, we would hold Cigna failed
to demonstrate that Cigna Life and Connecticut General
could enforce the arbitration provisions against PIH
Whittier.
We find Barsegian v. Kessler & Kessler (2013) 215
Cal.App.4th 446 (Barsegian) instructive. There, a complaint
was filed against four defendants, two of whom were parties
to an arbitration agreement with the plaintiff. (Id. at 449.)
After those two defendants moved to compel arbitration, the
court denied their motion, in part finding the third-party
litigation exception applied because of the non-signatory
defendants. (Id. at 450.) On appeal, the moving defendants
argued the trial court erred in finding the existence of third
parties where the complaint contained boilerplate agency
allegations asserting all defendants were agents of one
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another. (Id. at 451.) Our colleagues in Division One
rejected this argument, holding that the defendants’ denial
of the agency allegations rendered them insufficient to
permit the non-signatory defendants to enforce the
arbitration agreement. (Id. at 452–453.)
Here, similarly, PIH’s complaint contained allegations
that the Cigna entities were alter egos and agents, which
allegations the Cigna entities denied in their Answer. Cigna
attempts to distinguish Barsegian by arguing that the “clear
emphasis in the opinion was on the fact that the non-
signatory defendants really had no connection with the other
defendants who were parties to the contract with the
plaintiff that contained an arbitration provision,” whereas
here, “the Cigna Defendants are undeniably closely related.”
We are unpersuaded.
Barsegian turned not on the lack of connection between
the signatory and non-signatory defendants, but on the
defendants’ assertion that “they do not in fact wish to treat
Barsegian’s allegation of mutual agency as a judicial
admission, because the [signatory] defendants do wish to be
able to contest the truth of that allegation.” (Barsegian,
supra, 215 Cal.App.4th at 451, 453.) Based on this denial,
the court declined to treat the boilerplate agency allegation
as a judicial admission permitting the non-signatories to
enforce the arbitration agreement and thus affirmed the
denial of the motion to compel arbitration. (Ibid.)
Moreover, while Cigna contends each Cigna entity is
“closely related” to the others, Cigna cites to nothing in the
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record substantiating the claimed “close” relationship, let
alone an alter ego or agency relationship, either of which
would turn on a complex, multi-factorial analysis. For these
reasons, had Cigna not forfeited these arguments, PIH’s
boilerplate allegations would have been insufficient to
permit Cigna Life and Connecticut General to enforce the
arbitration clause in the Whittier-California Agreement.
The trial court did not err in finding they were third parties
within the meaning of section 1281.2(c).2
B. The Court Did Not Err in Finding the
Potential for Conflicting Rulings
Cigna argues that, even if Cigna Life and Connecticut
General could not enforce the Whittier-California
Agreement, the court nevertheless erred in denying Cigna’s
motion under the third-party litigation exception because
the causes of action not subject to arbitration “would not
arise out of the same transaction or series of transactions
that would create the possibility of conflicting rulings.”
“[T]he ultimate determination whether to stay or deny
arbitration based on the possibility of conflicting rulings on
2 Cigna cites several cases decided before Barsegian to
support its arguments: Rowe v. Exline (2007) 153 Cal.App.4th
1276, RN Solution, Inc. v. Catholic Healthcare West (2008) 165
Cal.App.4th 1511, and Thomas v. Westlake (2012)
204 Cal.App.4th 605. Because we find Cigna forfeited its
arguments, we do not address these cases, except to note that, to
the extent they are at odds with Barsegian, we find the analysis
in Barsegian more persuasive.
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common questions of law or fact is reviewed for an abuse of
discretion. [Citation.]” (Daniels v. Sunrise Senior Living,
Inc., supra, 212 Cal.App.4th at 680.) “‘A ruling amounts to
an abuse of discretion when it exceeds the bounds of reason .
. . .’” (Workman v. Colichman (2019) 33 Cal.App.5th 1039,
1056.) Here, we find the trial court’s determination was well
within the bounds of reason.
PIH’s fifth cause of action for “Breaches of Implied
Contract” accused Cigna of breaching an implied contract to
pay PIH Downey for emergency services provided to Cigna
insureds after the termination of the Downey-Cigna
Agreement. Its seventh cause of action for “Recovery for
Services Rendered” sought to recover the value of services
provided by PIH Downey to Cigna insureds after the
termination of the Downey-Cigna Agreement. The court
found the fifth cause of action subject to arbitration, but
found the seventh cause of action not subject to arbitration.
Yet both causes of action self-evidently share common
questions of fact, such as whether and to what extent PIH
Downey provided and billed for services to Cigna insureds
after the termination of the Downey-Cigna Agreement.
Similarly, PIH’s first and third causes of action for
“Breaches of Written Contract” contained allegations that
Cigna failed to pay or underpaid PIH for services rendered to
Cigna’s insureds. Its ninth and tenth causes of action
alleged violations of Business and Professions Code section
17200, and accused Cigna of “systematically failing to pay,
underpaying, or delaying payment to Plaintiffs” and “failing
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to provide the specific basis for denying all or part of the
claims at issue in this lawsuit.” While the parties agreed the
first and third causes of action were within the scope of the
arbitration agreement, the court found neither the ninth nor
tenth causes of action were. But all four causes of action
share common questions of fact, such as whether Cigna
failed to pay or underpaid PIH.
The trial court reasonably determined that the causes
of action not subject to arbitration shared common questions
of fact with those that were, and that those common
questions created a possibility of conflicting rulings. The
risk seems especially acute because the Whittier-California
Agreement and the Downey-Cigna Agreement each provide
for arbitration by different organizations. If the court were
to compel arbitration under the two agreements, there would
potentially be three different factfinders deciding the same
questions. We find no abuse of discretion in the court’s
refusal to compel arbitration under these circumstances.
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DISPOSITION
The court’s order denying arbitration is affirmed.
Respondents are awarded their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
SCADUTO, J. *
We concur:
COLLINS, Acting P.J.
CURREY, 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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