Cruz v. PacifiCare Health Systems, Inc.

111 Cal. Rptr. 2d 395, 91 Cal. App. 4th 1179
CourtCalifornia Court of Appeal
DecidedOctober 31, 2001
DocketA093002
StatusPublished
Cited by1 cases

This text of 111 Cal. Rptr. 2d 395 (Cruz v. PacifiCare Health Systems, Inc.) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cruz v. PacifiCare Health Systems, Inc., 111 Cal. Rptr. 2d 395, 91 Cal. App. 4th 1179 (Cal. Ct. App. 2001).

Opinion

111 Cal.Rptr.2d 395 (2001)
91 Cal.App.4th 1179

Jose E. CRUZ et al., Plaintiffs and Respondents,
v.
PACIFICARE HEALTH SYSTEMS, INC., et al., Defendants and Appellants.

No. A093002.

Court of Appeal, First District, Division Two.

August 28, 2001.
Review Granted October 31, 2001.

*396 Cooley, Godward, Martin S. Schenker, San Francisco, William E. Grauer, Christopher R.J. Pace, James V. Fazio, San Diego, for Defendants and Appellants.

The Furth Firm, Frederick P. Furth, Michael P. Lehmann, San Francisco, Ben Furth, for Plaintiffs and Respondents.

KLINE, P.J.

PacifiCare Health Systems, Inc., and its subsidiary, PacifiCare of California (collectively PacifiCare), appeal from an order denying their motion to compel arbitration of the claims asserted in Jose E. Cruz's unfair business practices complaint. PacifiCare contends that all Cruz's claims are subject to arbitration and, in the alternative, if some are not, that judicial proceedings should be stayed pending arbitration of those that are.

FACTUAL AND PROCEDURAL BACKGROUND

Cruz filed a class action against PacifiCare alleging violations of Business and Professions Code sections 17200 (unfair competition) and 17500 (false advertising) and the Consumer Legal Remedies Act (CLRA; Civ.Code, § 1750 et seq.), as well as unjust enrichment. The gravamen of his complaint is that undisclosed financial incentives to PacifiCare's providers significantly reduce the quality of health care its patients receive.

PacifiCare moved to compel arbitration of Cruz's claims pursuant to the arbitration clause in its health plan agreement with his employer[1] and the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.). *397 After a hearing, the trial court denied the motion to compel arbitration. PacifiCare filed a timely notice of appeal (Code Civ. Proc., § 1294, subd. (a)).

DISCUSSION

A. Arbitrability of Claims for Injunctive Relief.

"In enacting § 2 of the [Federal Arbitration] Act,[2] Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration." (Southland Corp. v. Keating (1984) 465 U.S. 1, 10, 104 S.Ct. 852, 79 L.Ed.2d 1.) The United States Supreme Court "has repeatedly made clear that arbitration may resolve statutory claims as well as those purely contractual if the parties so intend, and that in doing so, the parties do not forego substantive rights, but merely agree to resolve them in a different forum. [Citations.]" (Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1075, 90 Cal. Rptr.2d 334, 988 P.2d 67. (hereafter Broughton).) However, "That is not to say that all controversies implicating statutory rights are suitable for arbitration." (Mitsubishi Motors v. Soler Chrysler-Plymouth, Inc. (1985) 473 U.S. 614, 627, 105 S.Ct. 3346, 87 L.Ed.2d 444 (hereafter Mitsubishi).) For example, "the United States Supreme Court recognizes an `inherent conflict' exception to the arbitrability of federal statutory claims. [Citation.]" (Broughton, supra, 21 Cal.4th at pp. 1082-1083, 90 Cal.Rptr.2d 334, 988 P.2d 67.) That is, if Congress intended to prohibit waiver of a judicial forum for a particular statutory claim, such an intent will be deducible "from an inherent conflict between arbitration and the statute's underlying purposes." (Shearson/American Express, Inc. v. McMahon (1987) 482 U.S. 220, 227, 107 S.Ct. 2332, 96 L.Ed.2d 185.)

In Broughton, supra, 21 Cal.4th at page 1083, 90 Cal.Rptr.2d 334, 988 P.2d 67, our Supreme Court recognized that the United States Supreme Court's "inherent conflict" cases all concerned federal statutory claims, and thus the inquiry was into the Congressional intent behind those statutes. "But although the court has stated generally that the capacity to withdraw statutory rights from the scope of arbitration agreements is the prerogative solely of Congress, not state courts or legislatures [citation], it has never directly decided whether a legislature may restrict a private arbitration agreement when it inherently conflicts with a public statutory purpose that transcends private interests." (Ibid.) Accordingly, the Broughton court asked whether there is an inherent conflict between arbitration and the statute at issue there, California's Consumer Legal Remedies Act (id. at p. 1077, 90 Cal. Rptr.2d 334, 988 P.2d 67), and concluded that such a conflict does exist, under certain circumstances, between arbitration and the CLRA's injunctive relief provision (Civ.Code, § 1780, subd. (a)(2)). Specifically, the court held that where a CLRA plaintiff functions as a private attorney general, seeking to enjoin future deceptive practices on behalf of the general public, "arbitration is not a suitable forum, and the Legislature did not intend this type of *398 injunctive relief to be arbitrated." (Broughton, supra, 21 Cal.4th at pp. 1079-1080, 90 Cal.Rptr.2d 334, 988 P.2d 67.) Furthermore, Congress did not contemplate FAA enforcement of public injunction arbitration. (Id. at pp. 1083-1084, 90 Cal.Rptr.2d 334, 988 P.2d 67.) Two factors, taken together, convinced the Broughton court of the inherent conflict between arbitration and the underlying purpose of the CLRA's injunctive relief remedy: First, the relief is for the benefit of the general public rather than the party bringing the action, and second, the judicial forum has significant institutional advantages over arbitration in administering a public injunctive remedy. (21 Cal.4th at p. 1082, 90 Cal.Rptr.2d 334, 988 P.2d 67.)

The Broughton rationale has since been extended to claims for injunctive relief brought under Business and Professions Code section 17200 (Groom v. Health Net (2000) 82 Cal.App.4th 1189, 1199, 98 Cal. Rptr.2d 836 (hereafter Groom), Coast Plaza Doctors Hospital v. Blue Cross of California (2000) 83 Cal.App.4th 677, 691-692, 99 Cal.Rptr.2d 809 (hereafter Coast Plaza ), Warren-Guthrie v. Health Net (2000) 84 Cal.App.4th 804, 817, 101 Cal.Rptr.2d 260 (hereafter Warren-Guthrie)), and PacifiCare does not dispute that it extends to section 17500 injunctive claims as well.

In this case, the trial court ruled that all Cruz's claims for injunctive relief were inarbitrable under Broughton and Coast Plaza. On appeal, PacifiCare contends that Broughton has been abrogated by the recent United States Supreme Court opinion in

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111 Cal. Rptr. 2d 395, 91 Cal. App. 4th 1179, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cruz-v-pacificare-health-systems-inc-calctapp-2001.