Wascher v. Southern Cal. Permanente Med. Group

 

 

 

 

 

 

 

 

Filed 7/29/13  Wascher v. Southern Cal. Permanente Med. Group CA4/3

 

 

 

 

 

 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

 

 

California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b).  This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.

 

 

 

IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA

 

FOURTH APPELLATE
DISTRICT

 

DIVISION THREE

 
>

ROBERT WASCHER,         Plaintiff and Respondent,               v.   SOUTHERN CALIFORNIA PERMANENTE MEDICAL GROUP et al.,         Defendants and Appellants.

G047042            (Super. Ct. No. 30-2011-00523323)            O P I N I O N

                        Appeal from an order of
the Superior Court
of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Orange
County, B. Tam Nomoto Schumann, Judge.  Affirmed.

                        Davis
Wright Tremaine, John P. LeCrone, Portia R. Moore and Francisco Ochoa; Paul
Hastings, Paul W. Cane, Jr. and Elizabeth J. MacGregor for Defendants and
Appellants.

                        Pine & Pine, Norman
Pine, Beverly Tillett Pine and Janet Gusdorff; The Rager Law Firm and Jeffrey
Andrew Rager; The Mathews Law Group and Charles T. Mathews for Plaintiff and
Respondent.

*                      *                      *

                        Southern California
Permanente Medical Group, Kaiser Foundation Health Plan, Inc., and Kaiser
Foundation Hospitals (collectively, SCPMG) appeal from the trial court’s order
denying their motion to compel their former employee, cancer surgeon
Dr. Robert Wascher, to arbitrate his claims against them.  The trial court concluded SCPMG failed to
meet its burden to establish the existence of a valid arbitration contract
governing the parties’ dispute.  SCPMG
argues ordinary contract interpretation principles and public policy favoring
arbitration require the conclusion the parties mutually agreed to arbitrate
their disputes.  Specifically, SCPMG
relies on a practice-wide, internal dispute resolution agreement that SCPMG
contends supplemented Wascher’s employment contract and constituted a href="http://www.mcmillanlaw.com/">binding arbitration provision.  Wascher highlights numerous flaws in the
separate agreement that he claims prevented it from taking effect,
alternatively he argues that we may affirm the trial court’s ruling because the
supposed arbitration supplement is unconscionable.  The trial court concluded no arbitration
contract was formed, and therefore did not reach Wascher’s procedural and
substantive unconscionability claims.

                        On
our de novo review, we observe that the arbitration supplement on which SCPMG
relies expressly provides it is not controlling because it “shall not supersede
and is not meant to supersede” the dispute resolution provisions in “any
individual physician’s Employee Physician Contract . . . .”  Wascher’s employee physician contract
incorporated by reference certain “Rules and Regulations” detailing applicable
dispute resolution procedures, but SCPMG did not ground its motion in those
procedures.  SCPMG nowhere cites those
procedures for our review, nor suggests it furnished them to the trial court or
demanded arbitration based on them. 
Accordingly, it is impossible to determine whether those governing rules
and regulations required arbitration in the circumstances here.  Given the absence of the controlling dispute
resolution procedures, we affirm the trial court’s order denying SCPMG’s motion
to compel arbitration.

I

FACTUAL
AND PROCEDURAL BACKGROUND

                        In
2008, Wascher served as the director of a surgical oncology hospital division
and as a medical professor in New Jersey when SCPMG prevailed over eight
other prospective employers to hire him as a cancer surgeon for its Orange
County Kaiser hospitals (Kaiser OC). 
During the interview process, Wascher noted in an e-mail he hoped “to
further establish Kaiser OC as a growing regional cancer referral center” and,
while he was “happy to help out with non-Oncology General Surgery cases,” he
did “not want that non-Oncology volume to uncontrollably grow to the point of
overwhelming [his] Oncology practice, as eventually happened with
Dr. Litvak,” his predecessor at Kaiser OC.

                        Satisfied
in further interviews that his concerns were met and because his wife had
family in Orange County, Wascher signed an “Employee Physician” contract
with SCPMG in September 2008.  The
contract made numerous references to “SCPMG Rules and Regulations” governing
the practice.  For example, by virtue of
his full-time employment, Wascher would become eligible for partnership after a
waiting period, but “[n]othing in this Contract, the Partnership Agreement, >the Rules and Regulations or employment
by SCPMG shall be construed by Physician for any reason as a guarantee to
consider Physician for partnership in SCPMG or a guarantee to elevate Physician
to partnership in SCPMG.” 

                        The
contract incorporated under the heading, “Section XII — Dispute Resolution
and Arbitration,” a dispute resolution mechanism, as follows:  “Physician and SCPMG agree to follow the
Dispute Resolution Procedure, Rules and Regulations, section 11 [or
“section 1l,” as discussed
below], a copy of which is attached” (hereafter, R&R DRP).  The parties on appeal provide no record
reference for the R&R DRP or the Rules and Regulations as a whole, and we
therefore assume neither was introduced below. 
According to SCPMG, it provided Wascher with the Rules and Regulations
and other documents when he signed the contract.  SCPMG offers no record citation to suggest it
sought to compel arbitration based on the terms of the R&R DRP.

                        Instead,
at the same time Wascher signed his employment contract, he also signed a
document entitled, “Dispute Resolution Procedure for All Physicians and SCPMG
Approved by SCPMG Board of Directors May 18, 2006” (May 2006 DRP).  The May 2006 DRP provided generally that
“[i]t is in the interest of SCPMG and its Physicians that any dispute between a
Physician and SCPMG be resolved quickly and fairly.”  More specifically, the agreement stated:  “Should any matter remain unresolved after
informal efforts have been exhausted, this Dispute Resolution Procedure (‘DRP’)
shall be used as [the] exclusive means for the resolution of such disputes, >except as specified below.”  (Italics added.)

                        Among
other exceptions, the May 2006 DRP expressly provided it “shall not supersede
and is not meant to supersede the Dispute Resolution and Arbitration provision
within any individual physician’s Employee Physician Contract or Per Diem
Physician Contract.”  The May 2006 DRP
contemplated that its terms might differ from a dispute resolution mechanism
incorporated in a physician’s contract, and therefore specified:  “To the extent the terms of this DRP conflict
with the terms of such provision, the individual physician’s Employee Physician
Contract or Per Diem Physician Contract controls.”

                         For disputes covered by the May 2006 DRP
instead of the terms incorporated in an individual contract, the dispute
resolution mechanism consisted of five steps labeled, “Process I,” “Process
II,” et cetera, culminating in an arbitration procedure described in “Process
V.”  Process V referenced generally “the
relevant dispute rules of the American Arbitration Association,” but also
specified terms of the arbitral process, including selecting an arbitrator;
that each party must bear its own fees; discovery procedures; the arbitrator’s
authority over prehearing disputes; exceptions to the arbitrator’s authority,
including no authority to “require SCPMG to adopt new policies or procedures”;
complete confidentiality of the proceedings; and other details.  Process V’s description included the
statement:  “Any arbitration hereunder
shall be before a single arbitrator in accordance with the relevant dispute
rules of the American Arbitration Association (‘AAA’) then in effect (which can
be found at the website www.adr.org), except that in the event of any conflict
between those rules and those set forth herein, the rules set forth herein
shall control.”

                        According
to Wascher, once he began working at Kaiser, his relationship with SCPMG
progressively soured over the next two years, beginning with demands by Kaiser
general surgeons without oncology training “that they be allowed to perform
complex cancer [surgeries], including those of the href="http://www.sandiegohealthdirectory.com/">pancreas and stomach,”
leading to “unusually high complication rates and unexpected patient
mortalities.”  Despite Wascher’s
complaints, SCPMG management brushed off his concerns as “‘the cost of doing
business.’”  According to Wascher, he
“attempted, in a professional and collegial manner, to educate his colleagues
on the need for improved patient care” at cancer committee meetings, including
by presenting detailed descriptions of procedures with photographs.  Wascher’s efforts only bred resentment that
he was making the other surgeons “‘look bad,’” and elicited critiques that
“‘[h]e’s too book smart’” and “‘[w]e don’t need any sub-specialists in our
Department, because a good general surgeon can do everything.’”

                        According
to Wascher, SCPMG leadership retaliated by closing the highly-regarded “Center
of Excellence” for complex cancer surgery that Wascher had initiated with
Kaiser’s only other specially-trained cancer surgeon.  When that surgeon in response “simply refused
to do anymore complex surgical oncology cases,” leaving Wascher “with the
entirety of the surgery oncology” practice, Kaiser officials repeatedly
rebuffed his requests to “reduce his non-cancer general surgery caseload,”
leading to “significant delays in surgeries [for] cancer patients who urgently
needed” treatment.  Matters came to a
head in February 2011 when SCPMG formally informed Wascher he would not be
considered for partnership and instead that would be fired in August 2011,
at the end of the six-month termination notice period he had negotiated in his
contract.

                        In
November 2011, Wascher filed suit against SCPMG for wrongful termination,
failure to promote him, and other retaliatory employment actions in violation
of public policy (Bus. & Prof. Code, § 2056 [barring retaliation
against physicians who advocate for patient care]; Labor Code, §§ 970,
6310-6312), promissory fraud, defamation per se, intentional infliction of
emotional distress, and unfair business practices.  SCPMG moved to compel arbitration based on
the May 2006 DRP.

                        At
the hearing on the motion, given the May 2006 DRP appeared to be a different
document than section 11 of the R&R DRP incorporated in
Section XII of Wascher’s employment contract, the trial court asked SCPMG,
“What happened to section 11?”  

                        Counsel
for SCPMG replied, “Section 11. 
Well, we can talk about that first. 
[¶]  That reference — it actually
says Section 1-L and that’s a reference to the Rules and Regulations of the
partnership which is another document that was provided to the plaintiff.”  The court noted, “Well, gosh, it doesn’t look
like 1-L,” and the following colloquy occurred: 
“[Counsel:]  It’s a bad copy, your
Honor.  [Court:]  Uh-huh. 
[Counsel:]  But that’s
. . . what the reference is to. 
And that’s a reference to a separate document called the Rules and
Regulations.  So there’s the Employment
Contract, the [May 2006] Dispute Resolution Procedure, the Rules and
Regulations, those are all sent to physician candidates at the time that they
[are] made an offer of employment.  So
that would have been a separate document.”

                        SCPMG
did not introduce or address the terms of section 1-L or otherwise explain
what, if any, arbitration procedures that part of the Rules and Regulations may
have required.  Nor did the trial court
discuss section 1-L/section 11 further.

                        Instead,
the court explained it found SCPMG’s reliance on the May 2006 DRP
inadequate to compel arbitration.  The
court found there was “no meeting of the minds” between the parties about
arbitration.  Specifically, the court
found troublesome the “obscure” reference in Process V directing the
prospective employee to the AAA Web site to find the applicable dispute
resolution mechanism “then in effect,” noting then “might be on the date of hire, on the day the dispute arose,
on the date the arbitration’s demanded, or even when the process is under
way.”  The court also expressed doubt,
“[a]ssuming the employee locates and reads the rules found in the AA[A] Web site,”
about a “layperson . . . determin[ing] which of the myriad AAA rules
may conflict” with the May 2006 DRP and ascertaining, between the May 2006
DRP and the AAA rules, “which rules in both documents may be merely
supplemental or additional.” 

                        The
court also took issue with “the arbitrator’s apparently unrestricted option to
apply either federal or state [arbitration] law” because the prospective hire
“does not even know which body of law may be used to interpret the contract or
how such a decision might be made.”  The
court further viewed the supposed arbitration terms as too amorphous to
constitute a genuine agreement because the May 2006 DRP “allows Kaiser to
unilaterally change the DRP terms as it wishes.” 

                        The
court concluded that “absent adequate notice of the agreement’s terms, there
can be no contract to arbitrate” and therefore “no contract was formed.”  Consequently, Wascher’s unconscionability
challenge was moot because “issues of procedural and substantive
unconscionability do not survive” the lack of an arbitral contract.  SCPMG now appeals.

II

DISCUSSION

SCPMG
contends federal and state arbitration principles and state contract law
required the trial court to compel the parties to arbitrate their dispute.  Both the California Arbitration Act (Code
Civ. Proc., § 1280 et seq.) and the Federal Arbitration Act (FAA;
9 U.S.C. § 1 et seq.) recognize “‘“arbitration as a speedy and
relatively inexpensive means of dispute resolution”’ and are intended ‘“to
encourage persons who wish to avoid delays incident to a civil action to obtain
an adjustment of their differences by a tribunal of their own choosing.”’  [Citation.]” 
(St. Agnes Medical Center v.
PacifiCare of California (2003) 31 Cal.4th 1187, 1204; >AT&T Mobility LLC v. Concepcion
(2011) 563 U.S. ___, ___; 131 S.Ct. 1740, 1745 (AT&T Mobility).)  The
fundamental policy underlying both Acts “is to ensure that arbitration
agreements will be enforced in accordance
with their terms.”  (>Vandenberg v. Superior Court (1999)
21 Cal.4th 815, 836, fn. 10, original italics; AT&T Mobility, at p. 1748.)

Arbitration
is therefore a matter of contract.  (>Sparks v. Vista Del Mar Child & Family
Services (2012) 207 Cal.App.4th 1511, 1517-1518 (Sparks).)  The “‘“‘“policy
favoring arbitration cannot displace the necessity for a voluntary >agreement to arbitrate.”’  [Citation.] 
‘Although “[t]he law favors contracts for arbitration of disputes
between parties” [citation], “‘there is no policy compelling persons to accept
arbitration of controversies which they have not agreed to arbitrate
. . . .’”  [Citations.]’”  [Citation.] 
“Absent a clear agreement to submit disputes to arbitration, courts will
not infer that the right to a jury trial has been waived.”  [Citation.]’ 
[Citation.]”  (>Id. at p. 1518, original italics.)

Code
of Civil Procedure section 1281.2 requires a trial court to grant a petition to
compel arbitration “if [the court] determines that an agreement to arbitrate
the controversy exists.”  (Code Civ.
Proc., § 1281.2.)  Accordingly,
“‘when presented with a petition to compel arbitration, the trial court’s first
task is to determine whether the parties have in fact agreed to arbitrate the
dispute. . . .’ 
[Citation.]”  (>Gorlach v. Sports Club Co. (2012)
209 Cal.App.4th 1497, 1505 (Gorlach);
see also Sparks, supra, 207 Cal.App.4th at p. 1517.)  “A party seeking to compel arbitration has
the burden of proving the existence of a valid agreement to arbitrate.  [Citations.] 
Once that burden is satisfied, the party opposing arbitration must prove
by a preponderance of the evidence any defense to the petition.  [Citations.]” 
(Sparks, at p. 1518.)

Although
the FAA preempts any state law that stands as an obstacle to its objective of
enforcing arbitration agreements according to their terms, such as a rule
requiring classwide arbitration (see AT&T
Mobility, supra, 131 S.Ct.
at p. 1748), we apply general California contract law to determine whether
the parties formed a valid agreement to arbitrate their dispute (>Sparks, supra, 207 Cal.App.4th at p. 1518; see also >Gorlach, supra, 209 Cal.App.4th at p. 1505).  “General contract law principles include that
‘[t]he basic goal of contract
interpretation is to give effect to the parties’ mutual intent at the time
of contracting.  [Citations.]  . . .’  [Citation.]” 
(Mitri v. Arnel Management Co.
(2007) 157 Cal.App.4th 1164, 1170 (Mitri).)  Contract law also requires the parties agree
to the same thing in the same sense. 
(Civ. Code, §§ 1550, 1565, 1580; Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th
793, 811 (Weddington).)

“There
is no uniform standard of review for evaluating an order denying a motion to
compel arbitration.  [Citation.]  If the court’s order is based on a decision
of fact, then we adopt a substantial evidence standard.  [Citations.] 
Alternatively, if the court’s denial rests solely on a decision of law,
then a de novo standard of review is employed. 
[Citations.]”  (>Robertson v. Health Net of California, Inc.
(2005) 132 Cal.App.4th 1419, 1425.) 
Interpreting a written document to determine whether it is an
enforceable arbitration agreement is a question of law subject to de novo
review when the parties do not offer conflicting extrinsic evidence regarding
the document’s meaning.  (>24 Hour Fitness, Inc. v. Superior Court
(1998) 66 Cal.App.4th 1199, 1212.) 
Here, neither party offered extrinsic evidence, and the de novo standard
therefore applies.

The
basic flaw in SCPMG’s attempt to compel arbitration is that it failed to
include the Rules and Regulations pertaining to “Dispute Resolution and Arbitration”
incorporated in Wascher’s employment contract. 
Section XII of the employment contract, entitled “Dispute
Resolution and Arbitration,” incorporated by reference section 11 (or section
“1l” or “1-L,” as SCPMG explained) of
the Rules and Regulations as the parties’ agreed-upon method of dispute
resolution.  “‘“‘It is, of course, the
law that the parties may incorporate by reference into their contract the terms
of some other document. 
[Citations.]’”’”  (>Wolschlager v. Fidelity National Title Ins.
Co. (2003) 111 Cal.App.4th 784, 790.) 
“The contract need not recite that it ‘incorporates’ another document,
so long as it ‘guide[s] the reader to the incorporated document.’  [Citations.]” 
(Shaw v. Regents of University of
California (1997) 58 Cal.App.4th 44, 54.) 

We
see no reason to suppose section 11 (or “1l” or “1-L”) of the Rules and
Regulations was not incorporated in Wascher’s employment contract since
Section XII of the employment contract clearly referenced it.  In contrast, for example, the court in >Chan v. Drexel Burnham Lambert, Inc.
(1986) 178 Cal.App.3d 632, 641, 643-644, refused to enforce an arbitration
provision purportedly incorporated into the parties’ contract because the
contract failed to clearly identify by title the specific document containing
the arbitration provision.  Here, the
employment contract clearly specified the Rules and Regulations contained the
applicable dispute resolution procedure, and presumably a cursory review of the
Rules and Regulations would dispel any fleeting confusion caused by the
similarity in typeface between “11” and “1l.” 
The parties do not argue otherwise, and our de novo review of the plain
language in Section XII of the employment contract confirms section 11’s
incorporation in that contract.  The party
seeking to enforce an arbitration provision incorporated by reference must
establish the provision it seeks to enforce is the same provision to which the
parties agreed.  (Kleveland v. Chicago Title Ins. Co. (2006) 141 Cal.App.4th
761, 765.) 

SCPMG,
however, instead relied solely on another
dispute resolution contract Wascher signed (the May 2006 DRP), and the very
terms of that contract render fatal
SCPMG’s omission of section 11 of the Rules and Regulations (R&R
DRP).  Both the May 2006 DRP on which SCPMG relies and the R&R DRP may well have provided for arbitration as a
component of the parties’ agreed-upon dispute resolution mechanism.  Indeed, it is likely the R&R DRP required
some form of arbitration for at least some of the parties’ disputes because
Section XII of the employment contract was entitled “Dispute Resolution >and Arbitration” (italics added), and
then referred to section 11.  But
the core problem is that it was SCPMG’s burden to establish >what the parties agreed to arbitrate and
to show their current dispute fell within that agreement.

A
petition to compel arbitration “‘“‘is in essence a suit in equity to compel
specific performance of a contract.’”’ 
[Citations.]”  (>Mansouri v. Superior Court (2010)
181 Cal.App.4th 633, 641-642; see also Gorlach,
supra, 209 Cal.App.4th at
p. 1505.)  As with any other
specific performance claim, a party seeking to enforce an arbitration agreement
must show the agreement’s terms “‘are sufficiently definite to enable the court
to know what it is to enforce.’”  (>Real Estate Analytics, LLC v. Vallas
(2008) 160 Cal.App.4th 463, 472; 13 Witkin, Summary of Cal. Law (10th
ed. 2005) Equity, § 42, p. 334.) 
Indeed, a petition to compel arbitration must set forth the provisions
of the arbitration agreement verbatim or attach a copy of the agreement and
incorporate it by reference.  (Cal. Rules
of Court, rule 3.1330; Condee v. Longwood
Management Corp. (2001) 88 Cal.App.4th 215, 218.)  “‘Only the valid and binding agreement of the
parties, including all material terms well-defined and clearly expressed, may
be ordered specifically performed.’ 
[Citation].”  (>Weddington, supra, 60 Cal.App.4th at p. 817.) 

Here,
SCPMG’s sole reliance on the May 2006 DRP is misplaced because that very
agreement specified it “shall not supersede and is not meant to supersede the
Dispute Resolution and Arbitration provision within any individual physician’s
Employee Physician Contract or Per Diem Physician Contract.”  As discussed above, Wascher’s employment
contract unmistakably incorporated section 11 of the Rules and Regulations
as the parties’ dispute resolution protocol. 
SCPMG now argues on appeal that the May 2006 DRP essentially
reiterates the same arbitration terms as section 11.  But the May 2006 DRP contemplated that its
terms might differ from a dispute resolution mechanism incorporated in a
physician’s contract, and therefore specified: 
“To the extent the terms of this DRP conflict with the terms of such
provision, the individual physician’s Employee Physician Contract or Per Diem
Physician Contract controls.”  In any
event, without section 11 of the Rules and Regulations, it is impossible
to determine whether the parties’ present dispute falls among those they agreed
to arbitrate or within an exclusion. 
Accordingly, our de novo review requires that we affirm the trial
court’s ruling denying SCPMG’s motion to compel arbitration.

III

DISPOSITION

                        The
trial court’s order is affirmed. 
Respondent is entitled to his costs on appeal.

 

 

                                                                                   

                                                                                    ARONSON,
J.

 

WE CONCUR:

 

 

 

RYLAARSDAM,
ACTING P. J.

 

 

 

IKOLA, J.