Dougherty v. U.S. Behavioral Health Plan

• Court: California Court of Appeal
• Decided: April 24, 2024
• Docket: E079741
• Status: Published

Opinion

Filed 4/24/24 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

CHRISTINE MATLOCK DOUGHERTY,

Plaintiff and Respondent, E079741

v. (Super. Ct. No. CIVSB2209642)

U.S. BEHAVIORAL HEALTH PLAN, OPINION

Defendant and Appellant.

APPEAL from the Superior Court of San Bernardino County. Michael A. Sachs,

Judge. Reversed.

Gibson, Dunn & Crutcher, Kahn A. Scolnick, Thomas Cochrane, Heather

Richardson, Isabella Sayyah, Michael J. Holecek, and Matt A. Getz, for Defendant and

Appellant.

Shernoff Bidart Echeverria, William M. Shernoff, Travis M. Corby, and Cooper F.

Johnson, for Plaintiff and Respondent.

1 I.

INTRODUCTION

Plaintiff and respondent, Christine Matlock Dougherty sued defendant and

appellant, U.S. Behavioral Health Plan, California (USB), for claims associated with her

son’s healthcare. USB petitioned to compel arbitration of her claims, but the trial court

denied the petition on the ground that USB’s arbitration agreement was not enforceable

because it did not comply with the disclosure requirements imposed by Health & Safety

Code section 1363.1 (section 1363.1).

USB argues the trial court’s order should be reversed for three reasons: (1) the

parties’ arbitration agreement delegated the issue of whether the agreement is enforceable

to the arbitrator, (2) the arbitration agreement between Dougherty and USB’s affiliate

complied with section 1363.1 and covers her claims, and (3) the Federal Arbitration Act

(9 U.S.C. § 1 et seq.) preempts section 1363.1.

We conclude USB forfeited its delegation-clause argument, but we agree with

USB that the trial court erroneously denied USB’s petition because USB complied with

section 1363.1. We therefore reverse and need not address USB’s preemption argument.

II.

FACTUAL AND PROCEDURAL BACKGROUND

Dougherty enrolled herself and her son, Ryan, in a UnitedHealthcare HMO health

plan (the plan). Dougherty was offered the plan through her employer via the California

Schools Voluntary Employee Benefit Association (CSVEBA). That association and

2 United Healthcare of California entered into a Group Subscriber Agreement (GSA),

which outlines the terms under which UnitedHealthcare health plans are offered to the

association’s members. One of the terms is an arbitration provision that states “[a]ll

disputes between [CSVEBA] and UnitedHealthcare shall be resolved by binding

arbitration.” The next term provides that all disputes between “Member . . .

UnitedHealthcare . . . shall be submitted to binding arbitration.” The GSA also contains

various attachments, which “is an integral part of th[e] Agreement.”

Dougherty enrolled in the plan for herself and Ryan by completing and signing an

enrollment form in November 2012. In doing so, Dougherty signed and agreed to a

“UnitedHealthcare Plan Members Binding Arbitration Agreement” (the plan’s arbitration

agreement). That agreement states in relevant part: “I AGREE AND UNDERSTAND

THAT ANY AND ALL DISPUTES, INCLUDING CLAIMS RELATED TO THE

DELIVERY OF SERVICES UNDER THE PLAN AND CLAIMS OF MEDICAL

MALPRACTICE . . . BETWEEN MYSELF AND MY DEPENDENTS ENROLLED IN

THE PLAN . . . AND UNITEDHEALTHCARE OF CALIFORNIA,

UNITEDHEALTHCARE OR ANY OF ITS PARENTS, SUBSIDIARIES OR AFFILIATES,

SHALL BE DETERMINED BY BINDING ARBITRATION . . . .” (Italics added.)

Immediately above the signature line, the agreement states: “My signature below

indicates that I have carefully read the above ‘Binding Arbitration’ language and agree to

its terms.”

3 The section immediately after the signature line, titled “UNITEDHEALTHCARE

PLAN,” contained a “Legal Entities Disclaimer.” The disclaimer explained that various

companies would provide different services. As relevant here, USB (or another entity)

would provide “[b]ehavioral health products.”

Enrollees in the plan are provided with a lengthy “Evidence of Coverage” (EOC)

booklet that outlines the plan’s benefits. Along with detailing plan members’ coverage,

the EOC also outlines the full terms of the plan’s arbitration agreement. Those terms

state in relevant part: “All disputes of any kind, including, but not limited to, claims

relating to the delivery of services under the plan and claims for medical malpractice

between [Dougherty] . . . and UnitedHealthcare . . . will be submitted to Binding

Arbitration. . . . Any disputes about the scope of arbitration, about the arbitration itself or

whether an issue falls under this arbitration provision will be resolved by the arbitrator . .

. . [¶] The arbitration will be performed by JAMS or another arbitration service . . . [and]

will be conducted under the JAMS Comprehensive Arbitration Rules and Procedures.”

Although the GSA states that the EOC is an “integral part” of the agreement, the

EOC does not require enrollees to sign anything.

Plan enrollees, including Dougherty, are also provided a “Behavioral Health

Supplement” (the supplement). The supplement explains that it is “a supplement to the

[EOC],” and plan members’ mental healthcare, including care for substance abuse, is

provided by USB. The Supplement goes on: “This [supplement] will help you become

more familiar with your Behavioral Health Care benefits. This [supplement] should be

4 used in conjunction with your [EOC]. It is a legal document that explains your

Behavioral Health Plan and should answer many important questions about your

benefits.” Like the EOC, the supplement is an “integral part” of the GSA, although it did

not require Dougherty to sign anything.

And, like the plan, the supplement contains an arbitration agreement. It states in

relevant part: “Any and all disputes of any kind whatsoever, including, but not limited to,

claims for medical malpractice . . . between [Dougherty] . . . and [USB] . . . shall be

submitted to Binding Arbitration. . . . [Dougherty] and [USB] further specifically agree

that any disputes about the scope of any arbitration or about the arbitration or about the

arbitrability of any dispute shall be determined by the arbitrator. [Dougherty] and [USB]

are . . . accepting the use of Binding Arbitration by a single arbitrator in accordance with

the Comprehensive Rules of JAMS in effect at the time of the arbitration . . . .”

While Ryan was enrolled in the plan, he admitted himself into a residential

treatment facility to treat his severe drug addiction USB initially agreed to cover his stay,

but USB denied coverage three days later on the ground that Ryan could be treated at

home. Shortly after his discharge from the facility, Ryan fatally overdosed. Dougherty

then sued USB in the superior court, claiming that its wrongfully denying coverage for

Ryan’s treatment at the facility caused his death.

In response, USB petitioned to compel arbitration of Dougherty’s claims. In its

moving papers, USB argued the supplement “govern[ed] the relationship” between

Dougherty and USB and was the “health plan contract with [USB] that form[ed] the

5 basis” of Dougherty’s claims, while the EOC was “the contract between [her] and

[UnitedHealthcare].” USB thus argued the supplement applied to “disputes about

behavioral health services.” USB also argued, however, that Dougherty had to arbitrate

her claims given her signature on the plan enrollment form agreeing to the plan’s

arbitration agreement, as outlined in the EOC.

Anticipating Dougherty’s argument in opposition, USB argued that both

arbitration provisions and the enrollment form complied with section 1363.1’s disclosure

requirements. Because “[a] valid arbitration agreement exists,” USB urged the trial court

to send Dougherty’s claims to arbitration.

USB went on to argue that the trial court “need not go much further than resolving

th[e] first gateway question” of whether a valid arbitration agreement exists, because the

next question, “whether the arbitration provisions encompass [Dougherty’s] claims,” was

delegated to the arbitrator. In USB’s view, “there can be no dispute that the parties

delegated questions regarding the scope of the arbitration—i.e., questions about whether

the claims alleged here are subject to arbitration—to the arbitrator.” USB thus asked the

trial court to order Dougherty to arbitrate her claims and stay the case pending the

resolution of the arbitration.

Dougherty opposed USB’s petition on the ground that her only arbitration

agreement with USB—the one contained in the supplement—did not comply with section

6 1 1363.1, subdivision (d), and thus it was unenforceable. Although Dougherty agreed that

the plan’s arbitration agreement, as stated in the EOC, complied with the statute given the

disclosure on the enrollment form that she signed, that agreement was between

Dougherty and UnitedHealthcare. Dougherty thus argued that because the plan and the

supplement are separate contracts between her and separate entities, USB could not “pass

off [UnitedHealthcare’s] enrollment-form disclosure as its own.” Dougherty then

acknowledged that the enrollment form disclosure states she must arbitrate any claims

she has against UnitedHealthcare’s “‘subsidiaries or affiliates,’” but USB did not argue

that it was a subsidiary or affiliate of UnitedHealthcare.

In its reply, USB argued at length that it is an “‘affiliate’” of UnitedHealthcare

because both are subsidiaries of the same parent corporation. USB supported the

argument with a declaration submitted along with its reply (the Nguyen declaration).

USB also argued that no violation of section 1363.1, subdivision (d) occurred because the

statute directs only a “health care service plan” to make the required disclosures—as

UnitedHealthcare did on the enrollment form—and does not mandate that the disclosures

“list every corporate entity to which they apply.”

1 Section 1363.1, subdivision (d) states that “[a]ny health care service plan that includes terms that require binding arbitration to settle disputes and that restrict, or provide for a waiver of, the right to a jury trial shall [display], in clear and understandable language,” in a disclosure with three conditions enumerated (a) through (c), “immediately before the signature line provided for the individual enrolling in the health care service plan.”

7 The trial court began the hearing on USB’s petition by asking USB why there was

an arbitration agreement for USB (the plan/EOC) and another for UnitedHealthcare (the

supplement). USB noted there was no evidence in the record on the issue, but surmised

that the supplement was necessary to make it “absolutely clear that claims under both

pieces of the health plan would be arbitrated.” The court replied that it was a “legal

problem” that the supplement did not comply with section 1363.1’s disclosure

requirements.

Dougherty began her argument by objecting to the Nguyen declaration that USB

submitted in support of its reply. Dougherty objected only on the ground that the

declaration was “new evidence . . . submitted with the reply.” When the court asked

Dougherty about USB’s argument that it is an “affiliate” of UnitedHealthcare, Dougherty

argued that none of the documents referred to USB as UnitedHealthcare’s affiliate

beyond “some very ambiguous terms [that] affiliates could apply.”

USB then responded to the court’s statement that there are “two separate

contracts.” USB argued that the plan, as detailed in the EOC, is the “main health plan”

and the supplement, which is incorporated into the plan, governs the mental healthcare

coverage of the plan. Thus, according to USB, the supplement is “part of the same

contract, [the] same health plan.”

The trial court then denied USB’s petition. The court reasoned that there were

“two documents”—the plan enrollment form and the supplement—and USB’s argument

that the supplement “was necessary just to cover all bases, seems to suggest . . . there was

8 some doubt that the first agreement would, in fact, cover [USB]. And so, in order to

cover their bases, they added that second document.” But because the supplement did not

provide the disclosures required by section 1361.3, even though they “easily could have

been” provided, the court denied USB’s petition and declined to stay the case.

USB timely appealed.

III.

DISCUSSION

USB contends the trial court erred for three reasons: (1) the issue of “whether

[USB’s] arbitration agreement was valid under the disclosure requirements of section

1363.1” was delegated to the arbitrator, (2) section 1363.1 did not require USB, as

UnitedHealthcare’s “affiliate,” to make a separate “section 1363.1 disclaimer,” and (3)

the FAA preempts section 1363.1. We conclude USB forfeited its first argument, agree

with its second argument, and need not address its third argument.

A. Delegation Clause

The arbitration agreement in the supplement states “any disputes about the scope

of any arbitration or about the arbitration or about the arbitrability of any dispute shall be

determined by the arbitrator.” It then explains that any arbitration between the parties

will be conducted according to JAMS rules. Based on these provisions, USB contends

the issue of whether the supplement’s arbitration agreement with Dougherty was invalid

9 for failing to comply with section 1363.1’s disclosure requirements was delegated to the 2 arbitrator to decide, not the trial court.

We conclude USB forfeited the argument by failing to raise it in the trial court.

Although USB referenced the delegation clause and JAMS rules below, USB did not

argue in its petition, reply, or at the hearing that the arbitrator, not the trial court, should

decide whether the arbitration agreement was unenforceable. Instead, USB repeatedly

asked the trial court to enforce the agreement and order Dougherty to arbitrate her claims.

USB thus forfeited its delegation-clause argument on appeal. (Mendoza v. Trans Valley

Transportation (2022) 75 Cal.App.5th 748, 770-771; Williams v. West Coast Hospitals,

Inc. (2022) 86 Cal.App.5th 1054, 1071.) We therefore decline to address it.

B. Section 1363.1

USB contends the trial court erroneously denied its petition to compel arbitration

on the ground that the supplement did not comply with section 1363.1. On this

undisputed record, we review the issue de novo. (Avery v. Integrated Healthcare

Holdings, Inc. (2013) 218 Cal.App.4th 50, 60.)

Section 1363.1 provides that “[a]ny health care service plan that includes terms

that require binding arbitration to settle disputes and that restrict, or provide for a waiver

of, the right to a jury trial shall include, in clear and understandable language, a

disclosure that meets” four enumerated conditions. Those conditions are:

2 Although the plan contains a delegation clause that is materially identical to the one in the supplement, USB does not rely on it to support this argument.

10 “(a) The disclosure shall clearly state whether the plan uses binding arbitration to

settle disputes, including specifically whether the plan uses binding arbitration to settle

claims of medical malpractice.

“(b) The disclosure shall appear as a separate article in the agreement issued to the

employer group or individual subscriber and shall be prominently displayed on the

enrollment form signed by each subscriber or enrollee.

“(c) The disclosure shall clearly state whether the subscriber or enrollee is waiving

his or her right to a jury trial for medical malpractice, other disputes relating to the

delivery of service under the plan, or both, and shall be substantially expressed in the

wording provided in subdivision (a) of [s]ection 1295 of the Code of Civil Procedure.

“(d) In any contract or enrollment agreement for a health care service plan, the

disclosure required by this section shall be displayed immediately before the signature

line provided for the representative of the group contracting with a health care service

plan and immediately before the signature line provided for the individual enrolling in the

health care service plan.”

Dougherty contends the trial court correctly denied USB’s petition because USB

violated section 1363.1, subdivision (d). Dougherty argued below and argues on appeal

that USB violated this provision because the supplement controls her claims against USB

and USB did not provide a compliant disclosure on an enrollment form, as section

1363.1, subdivision (d) requires. Thus, Dougherty contends she cannot be compelled to

arbitration. (Imbler v. PacifiCare of Cal., Inc. (2002) 103 Cal.App.4th 567.) The trial

11 court agreed because the supplement, the second of the “two documents” relevant to the

trial court’s analysis, did not contain a disclosure that complied with section 1363.1.

USB argues this finding was mistaken for several reasons. USB first contends the

trial court erroneously based its decision on the plan’s EOC and the supplement.

According to USB, the only relevant documents for the purposes of section 1363.1 are

the GSA and the enrollment form. USB argues this is so because the GSA outlines the

terms under which UnitedHealthcare health plans, such as Dougherty’s, are offered and

administered to CSVEBA members like Dougherty. USB in turn argues that

Dougherty’s health care service plan is a single plan with services by UnitedHealthcare

and USB “packaged and sold together,” she “enrolled in them together” by completing

the enrollment form, and so she “enrolled in a Plan that included services administered

by, among others, both [UnitedHealthcare] and [USB].” Thus, in USB’s view, the

enrollment form’s compliance with section 1363.1 was sufficient, and there was no need

for the supplement to separately comply with the statute. We agree.

Section 1363.1 provides that “[a]ny health care service plan” that requires

arbitration must comply with the disclosure requirements outlined in subdivisions (a)

through (d). Thus, by its plain terms, the statute’s disclosure requirements apply only to a

“health care service plan.”

Health and Safety Code section 1345 in turn defines “health care service plan” in

relevant part as “[a]ny person who undertakes to arrange for the provision of health care

services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for

12 those services, in return for a prepaid or periodic charge paid by or on behalf of the 3 subscribers or enrollees.” (Health & Saf. Code, § 1345, subd. (f)(1), italics added.)

On this record, this definition could apply only to UnitedHealthcare. As USB

argued below, the only healthcare plan Dougherty enrolled in was her plan with

UnitedHealthcare, which included mental health benefits (as outlined in the supplement)

and other services (as outlined in the EOC). Dougherty chose to enroll in the plan instead

of a different one offered to her. The plan was negotiated with CSVEBA and offered to

Dougherty as an employment benefit. Under the plan, CSVEBA (the subscriber) and/or

Dougherty (the enrollee) paid UnitedHealthcare to arrange, reimburse, or pay for health

care services provided to CSVEBA and/or Dougherty.

In other words, the record shows that Dougherty was an “enrollee” in

UnitedHealthcare’s plan, which “arrange[d] for the provision of health care services” to

her “in return for a prepaid or periodic charge paid by or on behalf of” Dougherty. On

the other hand, there is no evidence that Dougherty was an “enrollee or subscriber” of

USB, or that USB “arrange[d] for the provision of health care services” for Dougherty

“in return for a prepaid or periodic charge paid by or on [her] behalf.”

Thus, under section 1363.1, the only “health care service plan” at issue that

“includes terms that require binding arbitration” is Dougherty’s plan with

UnitedHealthcare, which includes both the EOC and the supplement as components of

3 Health and Safety Code section 1345, subdivision (f)(2), provides a definition not applicable here concerning health care service providers in foreign countries.

13 the plan. Dougherty agreed to the plan by signing the enrollment form, which is an

“enrollment agreement for a health care service plan.” (§ 1363.1, subd. (d).)

In our view, this is dispositive. Section 1363.1 applies only to “health care service

plans,” and Dougherty’s plan with UnitedHealthcare is the only “health care service

plan.” Section 1363.1, subdivision (d) thus applied only to UnitedHealthcare’s “contract

or enrollment agreement.

Dougherty argues at length as to why the enrollment form’s substance violated

section 1363.1. In particular, Dougherty contends the form is vague as to whether and

which claims against USB would be covered by the arbitration agreement.

However, in the trial court and on appeal, Dougherty identified subdivision (d) of

section 1363.1 as the only provision of the statute that USB allegedly violated. That

provision relates only to where the “disclosure required by” section 1363.1, subdivisions

(a) through (c) must be displayed—“immediately before the signature line provided for

the individual enrolling in the health care service plan.” There is no dispute the

enrollment form complied with this directive. And Dougherty makes no attempt to show

that the enrollment form’s disclosures somehow violated section 1363.1, subdivision (a),

(b), or (c).

As a result, we conclude there was no section 1363.1 violation. The trial court

erred in finding otherwise and denying USB’s petition to compel arbitration on that basis.

We therefore reverse its order denying the petition and need not decide whether the FAA

preempts section 1363.1, as USB contends.

14 IV.

DISPOSITION

The trial court’s order denying USB’s petition to compel arbitration is reversed.

USB may recover its costs on appeal.

CERTIFIED FOR PUBLICATION

CODRINGTON J.

We concur:

MILLER Acting P. J.

FIELDS J.