Hsu v. Prime Healthcare Services III CA4/2

• Court: California Court of Appeal
• Decided: September 14, 2015
• Docket: E060953
• Status: Unpublished

Opinion

Filed 9/14/15 Hsu v. Prime Healthcare Services III CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 TWO

FRANK J.Y. HSU,

Plaintiff and Respondent, E060953

v. (Super.Ct.No. CIVRS1307631)

PRIME HEALTHCARE SERVICES III, OPINION LLC et al.,

Defendants and Appellants.

APPEAL from the Superior Court of San Bernardino County. Thomas S. Garza,

Judge. Affirmed.

Law Offices of Herbert Hafif, Greg K. Hafif, and Michael G. Dawson for

Doll Amir & Eley, Michael M. Amir, Mary Tesh Glarum, Lloyd Vu, and Carly

Steinbaum for Plaintiff and Respondent.

Defendant Prime Healthcare Services III, LLC (Prime) allegedly owns and

operates two hospitals, Montclair Hospital Medical Center (Montclair) and Chino Valley

1 Medical Center (Chino Valley). It retained Dr. Frank J.Y. Hsu to act as medical director

for Montclair. Not quite five years later, it terminated him. Dr. Hsu then filed this

“whistleblower” action against Prime and other entities, claiming that he was terminated

because he had opposed inappropriate patient care practices — not at Montclair, but at

Chino Valley.

The written agreement between Prime and Dr. Hsu required arbitration of “[a]ny

dispute or controversy concerning non-professional issues arising under, out of, in

connection with, or in relation to this Agreement, or any breach thereof, or in connection

with the termination of this Agreement . . . .” (Italics added.) The trial court denied

defendants’ motion to compel arbitration. Defendants appeal.

We will hold that this action presents “professional” issues, rather than “non-

professional” issues, and thus it is not within the scope of the arbitration provision.

Hence, we will affirm.

I

FACTUAL BACKGROUND

The following facts are taken from the complaint and from the evidence

introduced in connection with the motion to compel arbitration. (See Zamora v. Lehman

(2010) 186 Cal.App.4th 1, 6.) We have omitted the evidence relating to whether the

arbitration provision was procedurally unconscionable, as it is unnecessary to the grounds

on which we resolve the appeal.

2 Prime owns and operates both Montclair and Chino Valley. Dr. Hsu is a well-

regarded and well-qualified local pulmonologist and internist.

In 2008, Montclair and Dr. Hsu entered into a written “Medical Director

Agreement” (Agreement) by which Montclair retained Dr. Hsu to act as its medical

director. The Agreement could be terminated by either party, without cause, by giving 30

days’ written notice. The Agreement included the following:

“ARTICLE VII

“DISPUTE RESOLUTION

“7.1 Disagreements on Professional Standards. Any disagreements arising under

this Agreement regarding the standard of professional practice or the character of service

furnished in the Hospital may be submitted to the Medical Staff Executive Committee by

Provider or Hospital for recommendation. The recommendations of the Medical

Executive Committee shall be forwarded to the Governing Board of the Hospital for final

decision. The decision of the Governing Board shall be binding on the parties hereto.

“7.2 Arbitration on Non-Professional Disputes. Any dispute or controversy

concerning non-professional issues arising under, out of, in connection with, or in

relation to this Agreement, or any breach thereof, or in connection with the termination of

this Agreement, shall be determined and settled by arbitration in Los Angeles County

pursuant to the rules of Judicial Arbitration & Mediation Services (‘JAMS’) using an

arbitrator approved by Provider and Hospital. If Hospital and Provider cannot agree on

an arbitrator, then such arbitrator shall be selected by the presiding judge of the San

3 Bernardino County Superior Court. Each party shall initially pay one-half (1/2) of the

expenses and fees of the arbitrator and costs of arbitration, provided however, that the

prevailing party shall be entitled to reasonable attorney’s fees and costs. Any demand for

arbitration shall be filed in writing with the other party within a reasonable time after the

dispute in question has arisen and before the time when commencement of a lawsuit

would be barred by any applicable statute of limitation. Each party shall have the right to

conduct discovery, and any discovery dispute shall be resolved by the arbitrator.”

Meanwhile, Dr. Hsu was also the head of a medical group called Inland

Pulmonary Medical Group (IPMG). According to the complaint, Chino Valley had a

“scheme” to increase its profits by admitting IPMG’s patients “needlessly” instead of

“putting [them] on observation status.” Dr. Hsu remonstrated with representatives of

Prime “about how the current policies at Chino Valley failed to adequately protect patient

care.” In March 2013, IPMG — with Dr. Hsu’s assistance — filed an action alleging that

Chino Valley was “putting corporate profits ahead of patient safety by, inter alia, failing

to call IPMG physicians when their patients present [in] the emergency room and/or are

admitted to the hospital.”

In April 2013, Montclair terminated Dr. Hsu. He alleges that he was terminated in

retaliation for IPMG’s lawsuit regarding Chino Valley and “for reporting concerns about

policies and procedures at Chino Valley, refusing to violate statutory obligations and

requirements at Chino Valley, and strenuously advocating for appropriate patient care

and procedures.” In fact — at least according to his complaint — officers of Prime and

4 of Montclair admitted to him that he had been fired because he had sued one of Prime’s

hospitals.

II

PROCEDURAL BACKGROUND

In 2013, Dr. Hsu filed this action against Prime, and also against Prime Healthcare

Services, Inc. (Prime Healthcare) and Veritas Health Services, Inc. (Veritas). He asserted

causes of action against all defendants for retaliation by a health facility against a

whistleblower (Health & Saf. Code, § 1278.5) and for retaliation against a health care

practitioner (Bus. & Prof. Code, § 510). In addition, he asserted a cause of action for

breach of the covenant of good faith and fair dealing, solely against Prime, and a cause of

action for intentional interference with contract, solely against Prime Healthcare and

Veritas.

In December 2013, defendants filed a motion to compel arbitration. In his

opposition to the motion, Dr. Hsu argued that the action was not within the scope of the

arbitration provision and that the arbitration provision was unconscionable.

After hearing argument, the trial court denied the motion, stating three alternative

grounds. First, it ruled that Dr. Hsu’s claims were not within the scope of the arbitration

provision. Second, it ruled that the arbitration provision was substantively and

procedurally unconscionable. Third, it ruled that the arbitration provision violated the

requirements for an agreement to arbitrate unwaivable statutory rights as set forth in

Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83.

5 III

THE SCOPE OF THE ARBITRATION PROVISION

Defendants contend that the trial court erred by ruling that Dr. Hsu’s claims in this

action are not within the scope of the arbitration provision.

“When deciding whether the parties agreed to arbitrate a dispute, courts generally

apply ordinary state-law principles of contract interpretation. [Citation.]” (Khalatian v.

Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651, 659.) “‘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.] In determining the scope of an arbitration clause, “[t]he

court should attempt to give effect to the parties’ intentions, in light of the usual and

ordinary meaning of the contractual language and the circumstances under which the

agreement was made [citation].” [Citation.]’ [Citation.]” (RN Solution, Inc. v. Catholic

Healthcare West (2008) 165 Cal.App.4th 1511, 1523.)

“‘[T]he burden is on “the party opposing arbitration to demonstrate that an

arbitration clause cannot be interpreted to require arbitration of the dispute.”’ [Citation.]

In other words, ‘an order to arbitrate a particular grievance should not be denied unless it

may be said with positive assurance that the arbitration clause is not susceptible of an

interpretation that covers the asserted dispute.’ [Citation.]” (Titolo v. Cano (2007) 157

Cal.App.4th 310, 316-317.)

6 “‘When a trial court’s interpretation of a written agreement is appealed and no

conflicting extrinsic evidence was admitted, the interpretation of the contract is a

question of law which we review de novo. [Citations.]’ [Citation.]” (Rancho Pauma

Mutual Water Company v. Yuima Municipal Water District (2015) 239 Cal.App.4th 109,

115.)

The arbitration provision — section 7.2 of the Agreement — applied to “[a]ny

dispute or controversy concerning non-professional issues arising under, out of, in

connection with, or in relation to this Agreement, or any breach thereof, or in connection

with the termination of this Agreement . . . .” Defendants argue that this is a dispute “in

connection with the termination of th[e] Agreement.” Apparently they read the language

this way:

“Any dispute or controversy concerning”:

a. “non-professional issues arising under, out of, in connection with, or in

relation to this Agreement, or”

b. “any breach thereof, or”

c. “in connection with the termination of this Agreement . . . .”

However, if “concerning” precedes each of these three alternatives, so that the

second alternative is “Any dispute or controversy concerning . . . any breach thereof,”

then the third alternative would read, “Any dispute or controversy concerning . . . in

connection with the termination of this Agreement,” which makes no sense. And if

“concerning” is to precede only the first alternative, then the second alternative would

7 read, “Any dispute or controversy . . . any breach thereof,” which likewise makes no

sense.

Rather, the only possible way to read it is:

“Any dispute or controversy concerning non-professional issues”:

a. “arising under, out of, in connection with, or in relation to this

Agreement, or any breach thereof, or”

b. “in connection with the termination of this Agreement . . . .”

Accordingly, a dispute is arbitrable only if it is “concerning non-professional

issues . . . in connection with the termination of this Agreement . . . .” (Italics added.)

Defendants’ opening brief is not particularly helpful because it does not address

the meaning of “non-professional issues.” Dr. Hsu specifically argued below that this

case is not within section 7.2 because it involves professional issues. The trial court

apparently agreed. Nevertheless, defendants did not even attempt to explain why this

was error. Indeed, in this part of their argument, defendants did not even quote the words

“non-professional”; they glided over them using an ellipsis. We may uphold the trial

court’s ruling on the sole ground that defendants failed to challenge this aspect of the

ruling. (In re Marriage of LaMoure (2011) 198 Cal.App.4th 807, 817 [argument not

raised in opening brief is forfeited] [Fourth Dist., Div. Two].) Nevertheless, we will also

discuss the issue on the merits.

Section 7.1 of the Agreement provided that disputes “regarding the standard of

professional practice or the character of service furnished by the Hospital” could be (but

8 did not have to be) submitted initially to the Medical Staff Executive Committee for a

recommendation and then to the Governing Board for final decision. By contrast, section

7.2 provided that disputes “concerning non-professional issues” must be submitted to

JAMS for arbitration.

It is apparent that sections 7.1 and 7.2 of the Agreement were intended to be

mutually exclusive. In the trial court, Dr. Hsu argued otherwise. In this appeal, however,

he appears to have abandoned this argument. And wisely so. It would make no sense to

provide that a given issue “may be” submitted to the Governing Board for “final

decision” yet also “shall be determined and settled” by JAMS.

Section 7.1, then, defines “professional” issues. It specifies that they are issues

regarding either (1) “the standard of professional practice” or (2) “the character of service

furnished by the Hospital.” Evidently the thinking was that these are matters in which the

Medical Staff Executive Committee has some expertise. (See Unnamed Physician v.

Board of Trustees of Saint Agnes Medical Center (2001) 93 Cal.App.4th 607, 619-620

[requiring exhaustion of internal remedies “accords recognition to the ‘expertise’ of the

organization’s quasi-judicial tribunal”].) Any issue that is not within section 7.1 is “non-

professional” within section 7.2. In other words, “non-professional” is a residual

category.

Defendants do argue (in their reply brief) that “professional” disputes are limited

to disputes over practices or services at Montclair; thus, they do not encompass disputes

over practices or services at Chino Valley. This presumes that in section 7.1, “furnished

9 by the Hospital” modifies both (1) “the standard of professional practice” and (2)

“character of service.” We disagree. One may “furnish” service, but one does not

ordinarily “furnish” practice. We also note that the Medical Staff Executive Committee

would have the expertise to adjudicate disputes over the standard of professional practice

at other hospitals, not just at Montclair. Thus, “professional” encompasses disputes

“regarding the standard of professional practice” anywhere.

Dr. Hsu is claiming that defendants terminated him because of his efforts to

advocate for proper patient care at Chino Valley — initially by remonstrating with

representatives of Prime and ultimately by helping IPMG to sue Chino Valley. This

implicates his “standard of professional practice.” In addition, it implicates defendants’

“standard of professional practice” in the operation of Chino Valley.

We also note that Dr. Hsu’s whistleblower cause of action under Business and

Professions Code section 510 necessarily relates to his standard of professional practice.

This section was enacted “to provide protection against retaliation for health care

practitioners who advocate for appropriate health care for their patients.” (Bus. & Prof.

Code, § 510, subd. (a), italics added.) It declares it to be against “the public policy of this

[s]tate” to “terminate an employment or other contractual relationship with or otherwise

penalize a health care practitioner principally for advocating for appropriate health care

consistent with that degree of learning and skill ordinarily possessed by reputable health

care practitioners with the same license or certification and practicing according to the

applicable legal standard of care . . . .” (Id., subd. (c), italics added.) In other words, a

10 health care practitioner can claim protection under Business and Professions Code section

510 if and only if he or she is acting in accordance with applicable standards of

professional practice.

In sum, then, this case constitutes a “disagreement[] arising under th[e] Agreement

regarding the standard of professional practice” within the meaning of section 7.1. It

follows that it is not a “dispute . . . concerning non-professional issues” within the

meaning of section 7.2. Accordingly, the trial court correctly ruled that this case is not

within the scope of the arbitration provision.

In light of this holding, we need not and thus we do not discuss whether the trial

court correctly ruled that the arbitration provision was unconscionable. We also do not

discuss whether it correctly ruled that the arbitration provision impermissibly impacted

unwaivable statutory rights. Finally, we do not discuss whether Prime Healthcare and

Veritas would be entitled to enforce the arbitration provision.

IV

DISPOSITION

The order appealed from is affirmed. Dr. Hsu is awarded costs on appeal against

defendants.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

11 RAMIREZ P. J.

We concur:

HOLLENHORST J.

KING J.