When Are Nonsignatory Parties Bound to an Arbitration Agreement in California ?
The body of California authority concerning the binding effect of arbitration agreements on nonsignatory spouses and adult children is difficult to decipher.
In Gross v. Recabaren (1988) 206 Cal.App.3d 771, the Court held husband's physician-patient agreement to arbitrate "'any dispute as to medical malpractice'" extended to a nonsignatory wife's loss of consortium claim.
The Gross court decided to follow the approach taken in an older wrongful death case from Division Five of the Second District, Herbert v. Superior Court (1985) 169 Cal.App.3d 718.
Although Herbert involved an arbitration agreement entered when husband enrolled himself and his wife in a group medical plan, the Gross court applied its reasoning to a situation involving one spouse's physician-patient agreement for medical care.
The court concluded permitting a patient to submit any dispute to arbitration (including those of a spouse) is (1) consistent with the language of the statutes governing the contents of medical arbitration contracts ( 1295);
(2) "essential to further the goals of the legislation and the judicially declared preference in favor of joining loss of consortium and negligence claims";
(3) a "safeguard to the physician-patient relationship;
"(4) a way to "preserve important privacy rights of the patient." (Gross, supra, 206 Cal.App.3d at p. 781.)
When Are Nonsignatory Parties Bound to an Arbitration Agreement in California:
"The California cases binding nonsignatories to arbitrate their claims fall into two categories. In some cases, a nonsignatory was required to arbitrate a claim because a benefit was conferred on the nonsignatory as a result of the contract, making the nonsignatory a third party beneficiary of the arbitration agreement. In other cases, the nonsignatory was bound to arbitrate the dispute because a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration agreement, making it equitable to compel the nonsignatory to also be bound to arbitrate his or her claim." (County of Contra Costa, supra, 47 Cal.App.4th at p. 242; see also 1281 right to arbitration depends on contract.) Podolsky argues Wife and the Adult Children fall into the second category because Rafael bound Wife to arbitration and her wrongful death action cannot be tried in a different forum from the other nonsignatory heirs. We disagree. Absent one of the recognized exceptions (a benefit conferred to a third party beneficiary arrangement or a preexisting relationship) Rafael had no authority to bind his nonsignatory Adult Children to the arbitration agreement Rafael signed with a physician for his personal medical treatment.
"Appellate courts have stated that arbitration agreements are enforced with regularity against nonsignatories.However, a preexisting relationship between the nonsignatory and one of the parties to the arbitration agreement is a common factor in these cases." (County of Contra Costa, supra, 47 Cal.App.4th at p. 242.) For example, it is well settled, "Minors are bound by a parent's agreement to arbitrate medical malpractice claims filed against a health care provider. ( 1295, subd. (d); Doyle v. Giuliucci (1965) 62 Cal.2d 606, 609-610 43 Cal. Rptr. 697, 401 P.2d 1; see Pietrelli v. Peacock (1993) 13 Cal.App.4th 943, 947 16 Cal. Rptr. 2d 688 preconception contract binds child; Bolanos v. Khalatian (1991) 231 Cal.App.3d 1586, 1591 283 Cal. Rptr. 209 infant claiming in utero injuries; Wilson v. Kaiser Foundation Hospitals (1983) 141 Cal.App.3d 891, 896-900 190 Cal. Rptr. 649.)" (County of Contra Costa, supra, 47 Cal.App.4th at pp. 242-243.) Similarly, a person who is authorized to act as the patient's agent can bind the patient to an arbitration agreement. (Hogan v. Country Villa Health Services (2007) 148 Cal.App.4th 259, 265-268 55 Cal. Rptr. 3d 450.)
"Employees who did not agree to arbitrate claims must do so when an employer acting on their behalf enters into a medical services contract containing an arbitration clause. (Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 702-709 131 Cal. Rptr. 882, 552 P.2d 1178 statutes granted state employers implied authority to contract for medical plan on employees' behalf; Harris v. Superior Court (1986) 188 Cal.App.3d 475, 477 233 Cal. Rptr. 186 plaintiff asserts right to arbitrate.) Likewise, the general partner of a limited partnership is bound by the arbitration agreement entered into by the partnership and a third party. (Keller Construction Co. v. Kashani (1990) 220 Cal.App.3d 222, 225-229 269 Cal. Rptr. 259 'a nonsignatory doctor who benefited from an arbitration agreement between a patient and a health plan which provided the doctor's employer, a hospital, with patients was bound by the arbitration clause in the health care agreement'.)" (County of Contra Costa, supra, 47 Cal.App.4th at p. 243.) One court recently summarized these exceptions as follows: "'The common thread of all the above cases is the existence of an agency or similar relationship between the nonsignatory and one of the parties to the arbitration agreement. In the absence of such a relationship, courts have refused to hold nonsignatories to arbitration agreements. ...' " (Buckner v. Tamarin (2002) 98 Cal.App.4th 140, 142-143 119 Cal. Rptr. 2d 489 (Buckner).)In Hawkins v. Superior Court (1979) 89 Cal.App.3d 413, the Court held that a husband's application for Kaiser health insurance for himself and his wife, which contained an arbitration clause, required his wife to pursue her wrongful death action in arbitration.
Although the wife never personally agreed to the arbitration provision, the court held the case was distinguishable from Rhodes v. California Hospital Medical Center (1978) 76 Cal.App.3d 606, which "involved an individual patient contracting for medical services for herself whereas in the instant case the husband contracted for health care services for himself and his wife ... . Spouses have mutual obligations to care for and support the other , including the obligation to provide medical care citations, and they occupy a fiduciary relationship to each other. Decedent had the power to contract for the health plan for himself and his wife and ... implicit in that power is the implied authority to agree for himself and his wife to arbitrate claims arising out of medical malpractice." (Hawkins, supra, 89 Cal.App.3d at pp. 418-419.)
It analogized the purchase of a spouse's health insurance to those cases holding a parent has authority to contract for a minor child's medical services and bind the child to arbitration (Doyle v. Giuliucci, supra, 62 Cal.2d at p. 610), and an employer may bind those enrolled in the employees' group health care contract containing an arbitration provision (Madden v. Kaiser Foundation Hospitals, supra, 17 Cal.3d at p. 709).
Next came Herbert v. Superior Court (1985) 169 Cal.App.3d 718, which offered a philosophically different approach to the issue.
That case involved a member of the Teamster's union who enrolled his wife and five minor children in a Kaiser group health plan, which required arbitration of medical malpractice disputes. After husband died, the widow and her eight children (the five minors enrolled with Kaiser plus three adult children who were not) filed a wrongful death action against the group health care provider. The court determined the three adult children who were not members of the plan were nevertheless bound by it. (Id. at pp. 724-725.)
The Herbert court reasoned, "The claims of wife and the five minor children are governed by Hawkins, supra, 89 Cal.App.3d 413 ... (a case which also involved a Kaiser plan)." (Herbert, supra, 169 Cal.App.3d at p. 722.) The Herbert court recognized the Hawkins court left undecided the issue of "whether the arbitration provision of the plan agreement is binding upon adult heirs who are not members of the plan.We conclude that the arbitration contract executed by Mr. Herbert bound both the member and nonmember heirs to arbitrate their claims." (Id. at p. 724.)
The Herbert court offered many different policy reasons to support its conclusion, implicitly rejecting the Rhodes court's straightforward statutory analysis approach, recognizing wrongful death is the decedent's heirs' own, independent action. (Herbert, supra, 169 Cal.App.3d at pp. 724-727; see Rhodes, supra, 76 Cal.App.3d at p. 610.)
The Herbert court explained, "Important to our determination of this issue is an analysis of the agreement and the legal policies supporting it. The agreement was negotiated by the Teamsters, of which decedent was a member, with Kaiser for the benefit of the union's members. It is similar in nature to the agreement reviewed in Madden ... , supra, 17 Cal.3d 699 employee bound by group medical services contract entered into between the employer and Kaiser." (Herbert, supra, 169 Cal.App.3d at p. 724.)
The Herbert court noted the Supreme Court had concluded an arbitration contract such as the one in Madden was not an adhesion contract because the agreement was "'a product of negotiations between parties possessing parity of bargaining strength.'" (Id. at p. 724, quoting Madden, supra, 17 Cal.3d at p. 703.)
In addition to the above logic, the Herbert court offered the following laundry list of reasons that support binding the nonsignatory adult heirs:
(1) The action cannot be split into two different tribunals because "a single cause of action exists in the heirs for the wrongful death of a decedent";
(2) a wrongful death action is "technically a separate statutory cause of action" but "in a practical sense" it is "derivative of a cause of action in the deceased";
(3) "it is obviously unrealistic to require the signatures of all the heirs ..." (who are not identified until the time of the decedent's death) and might not be available;
(4) if the heirs "refused to sign they should not be in a position possibly to delay medical treatment to the party in need";
(5) decedents can bind their heirs through contracts and wills;
(6) the Code of Civil Procedure ( 1283.1 & 1295) evidences a legislative intent for arbitration of wrongful death actions arising from medical malpractice, and "it would be illogical to construe these statutory provisions to apply only under the fortuitous circumstances that all potential heirs are also plan members";
(7) arbitration is neither "'an extraordinary procedure'" nor "'especially disadvantageous'" to the heirs;
(8) ample authority supports the "strong judicial and public policy favoring arbitration over litigation as a means of settling disputes in medical malpractice cases," including wrongful death actions. (Herbert, supra, 169 Cal.App.3d at pp. 724-727.)
The Herbert court attempted to make its case factually distinguishable from Rhodes, stating in a footnote the Rhodes court simply held "an agreement to arbitrate signed by a decedent with the defendant hospital did not bind a nonsigning party to the agreement. There was no provision in the agreement whereby the signing party intended to bind his or her heirs to the arbitration clause." (Herbert, supra, 169 Cal.App.3d at p. 725, fn. 2.)
The Herbert decision was rejected by the majority in the next appellate court to consider the issue nearly a decade later.
The Second Appellate District, Division Four revisited the issue in Baker v. Birnbaum (1988) 202 Cal.App.3d 288.
The patient in Baker signed an agreement to arbitrate "'any dispute as to medical malpractice ...' which purported to bind the patient and 'anyone else who may have a right to assert a claim on her behalf ...' as well as other persons for whom she had responsibility, such as her spouse and any children." (Id. at p. 290.)
The patient and her husband brought claims against the doctor: The wife alleged negligence and the husband alleged loss of consortium. The court determined the agreement was inapplicable to the husband's claim for loss of consortium because the patient had "contracted for medical care solely on her own behalf, and the agreement to arbitrate related only to such services as would be provided to her under that contract." (Id. at p. 292.)
The court concluded there was no language in the agreement which would support a finding it was signed on behalf of any person other than the wife. (Id. at p. 293.)
As in Rhodes, the court in Baker reasoned that although public policy favors arbitration, "Arbitration assumes, however, an election by the parties involved to use it as an alternative to the judicial process. A party cannot be compelled to arbitrate a dispute it has not elected to submit. " (Id. at p. 291.)
Section 1283.1 provides "(a) All of the provisions of section 1283.05 relating to the right of discovery in arbitration shall be conclusively deemed to be incorporated into, made a part of, and shall be applicable to, every agreement to arbitrate any dispute, controversy, or issue arising out of or resulting from any injury to, or death of, a person caused by the wrongful act or neglect of another." (Italics added.)
Section 1295 provides for the arbitration of professional negligence claims including wrongful death and delineates strict requirements for a valid medical malpractice arbitration provision in an individual contract for medical services. Although these provisions were inapplicable to the Kaiser insurance plan at issue in Herbert the court found the language permitted arbitration of wrongful death and should be enforced. It concluded the language of "sections 1283.1 and 1295 evidence a legislative intent that a patient who signs an arbitration agreement may bind his heirs to that agreement, regardless of whether the heirs are also members of the plan." (Herbert, supra, 169 Cal.App.3d at p. 727.)Rules Regarding Contractual Arbitration:
Public policy favors arbitration as an expedient and economical method of resolving disputes, thus relieving crowded civil courts.
However, arbitration assumes that the parties have elected to use it as an alternative to the judicial process. Arbitration is consensual in nature.
The fundamental assumption of arbitration is that it may be invoked as an alternative to the settlement of disputes by means other than the judicial process solely because all parties have chosen to arbitrate them.
Even the strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement or who have not authorized anyone to act for them in executing such an agreement.
'The right to arbitration depends on a contract.' " (County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 Cal.App.4th 237, 244-245.)