Filed 11/26/07
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
EARL SWAYNE, et al.,
Plaintiffs and Respondents,
B195353
(Los Angeles County
Super. Ct. No. YC053454)
v.
TORRANCE CARE CENTER WEST,
INC., et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Andrew Kauffman, Judge. Affirmed.
Lewis, Brisbois, Bisgaard & Smith, Bryan R. Reid and Jennifer C. Hsu for
Defendants and Appellants.
Berglund, Johnson & Sommer, Rana Kawar and Jerrie S. Weiss for
Plaintiffs and Respondents.
Defendants Torrance Care Center West, Inc., dba Torrance Care Center
West (hereafter “TCC”) and William Nelson appeal from the trial court’s denial of
their petition to compel arbitration of the claims made by plaintiffs Earl Swayne, et
al. We conclude that the arbitration agreements at issue are unenforceable, because
they fail to contain a properly displayed disclosure stating that consent to
arbitration is not a precondition for admission or medical treatment. (See Health &
Saf. Code, § 1599.81, subd. (a); Title 22, Cal. Code Regs., § 72516, subd. (d).)
Therefore, we affirm.
BACKGROUND
1
TCC is a skilled nursing facility. Plaintiffs are the surviving heirs of Lillie
Rogers, and the executor of her estate. Plaintiffs filed a complaint against TCC
and Nelson (TCC’s owner/operator), alleging that TCC failed to provide adequate
care to Lillie Rogers during her residency from March 1, 2004 to April 5, 2005,
resulting in her death. Plaintiffs alleged causes of action for, among other things,
elder abuse, wrongful death, intentional infliction of emotional distress, and
professional negligence.
2
TCC and Nelson petitioned to compel arbitration. They produced copies of
a power of attorney executed by Lillie Rogers on April 24, 2003, in favor of her
granddaughter Gwendolyn McCall (one of the plaintiffs), and of two arbitration
1
As defined in Health and Safety Code section 1250, subdivision (c), a “‘[s]killed
nursing facility’ means a health facility that provides skilled nursing care and supportive
care to patients whose primary need is for availability of skilled nursing care on an
extended basis.”
2
Earl Swayne sued in his individual capacity as a surviving heir, and as executor of
the estate. The remaining heirs (Carl Swayne, Darryl Swayne, Myrna Binion Williams,
Rochelle Batiste, and Gwendolyne McCall) sued in their individual capacities.
2
agreements executed by McCall upon Rogers’ admission to TCC on March 1,
2004. The arbitration agreements (one of which related specifically to medical
malpractice claims, and the other to services provided by TCC) were
comprehensive, and in substance required arbitration of all claims arising from
Rogers’ treatment or care, except for claims under the Patients’ Bill of Rights
covered by Health and Safety Code section 1430 and Title 22, California Code of
Regulations, section 72527.
Plaintiffs opposed the petition to compel arbitration on various grounds. As
here relevant, they argued that the arbitration agreements did not comply with the
disclosure requirements of Title 22, California Code of Regulations, section 72516.
They also argued that the power of attorney was invalid, and did not give McCall
the authority to consent to arbitration on Rogers’ behalf.
The trial court denied the petition. It ruled that evidence produced by
plaintiffs (records from Rogers’ stay at TCC) demonstrated that Rogers was not
competent at the time she was admitted to TCC. Because the power of attorney
was nondurable, the court found that it was terminated by Rogers’ incompetence,
and did not authorize McCall to sign the arbitration agreements.
DISCUSSION
TCC and Nelson contend that they proved the validity of the arbitration
agreements, and that the power of attorney executed by Rogers was not terminated.
Plaintiffs respond in part that regardless of whether the power of attorney remained
valid, the arbitration agreements are unenforceable because they do not contain the
disclosure required by the State Department of Health Services in Title 22,
California Code of Regulations, section 72516, subdivision (d). We agree, and
therefore do not reach the issue whether the power of attorney was terminated.
3
Skilled nursing facilities are governed by a comprehensive statutory and
regulatory scheme. (Flores v. Evergreen at San Diego, LLC (2007) 148
Cal.App.4th 581, 590.) As part of this scheme, Health and Safety Code section
1599.81 (hereafter “section 1599.81”) provides in relevant part that “[a]ll
arbitration clauses shall be included on a form separate from the rest of the
admission contract” (§ 1599.81, subd. (b)), and that “[a]ll contracts of admission
that contain an arbitration clause shall clearly indicate that agreement to arbitration
is not a precondition for medical treatment or for admission to the facility”
(§ 1599.81, subd. (a)).
The Legislature delegated to the State Department of Health Services the
authority to formulate a standard admission agreement meeting these requirements.
(Health & Saf. Code, § 1599.61, subd. (a).) All facilities must use the standard
agreement (ibid.), and “[n]o facility shall alter the standard agreement unless so
directed by the department” (id., subd. (b)(1)).
In Title 22, California Code of Regulations, section 72516 (hereafter
“section 72516”), the Department adopted a standard admission agreement as “the
sole contract of admission between residents and the licensee.” (§ 72516, subd.
(a).) In relevant part, section 72516 provides that “[a]ny arbitration agreement
shall be separate from the Standard Admission Agreement and shall contain the
following advisory in a prominent place at the top of the proposed arbitration
agreement, in bold-face font of not less than 12 point type: ‘Residents shall not be
required to sign this arbitration agreement as a condition of admission to this
facility.” (§ 72516, subd. (d).)
In the instant case, each arbitration agreement produced by TCC and Nelson
contains the substance of the required disclosure. But neither agreement “clearly
indicate[s]” that consent to arbitration is not required for admission or treatment
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(§ 1599.81, subd. (a), italics added), in that neither contains in a prominent spot at
the top, in bold print, the advisory required by section 72516, subdivision (d).
In one arbitration agreement, the disclosure does not appear until the fourth
paragraph, Article 4, which states: “Agreement to arbitrate is not a precondition
for medical treatment or for admission to the Facility.” Although appearing in a
separate paragraph, this disclosure is in the middle of page, and is not highlighted
in any way so as to distinguish it from the other paragraphs. In the other
arbitration agreement, the disclosure does not appear until the second sentence of
Article 3, the third paragraph, which states: “By signing this arbitration agreement
below, the Resident agrees to be bound by the foregoing arbitration provisions.
The Resident acknowledges that he or she has the option of not signing this
arbitration agreement and not being bound by the arbitration provisions contained
herein. The execution of this arbitration agreement is not a precondition to
receiving care and supervision, protective supervision, personal care, personal
activities of daily living, or health related services as defined by Health & Safety
Code § 1569.2 or for admission to the Facility.” Like the disclosure in the first
agreement, this disclosure appears in the middle of the page, and is not highlighted
in any way to distinguish it from the other provisions.
The failure of the arbitration agreements to properly display the required
disclosure is fatal to enforcement. In the related context of arbitration disclosures
in health care service plans, a series of decisions has invalidated arbitration clauses
for failure to comply with Health and Safety Code section 1363.1, which requires
that arbitration disclosures in such plans “appear as a separate article” and be
“prominently displayed on the enrollment form signed by each subscriber or
enrollee.” (Health & Saf. Code, § 1363.1, subd. (b).) Because the purpose of
requiring prominent display is to “ensure consent to a binding agreement to
arbitrate” (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 69
5
(Malek)), courts have held that failure to comply with the “prominently displayed”
requirement renders the arbitration clause unenforceable. (Ibid.; see Medeiros v.
Superior Court (2007) 146 Cal.App.4th 1008, 1015, 1018-1019; Zembsch v.
Superior Court (2006) 146 Cal.App.4th 153, 168 (Zembsch); Robertson v. Health
Net of California, Inc. (2005) 132 Cal.App.4th 1419, 1428-1429 (Robertson).)
TCC and Nelson do not dispute that the arbitration agreements fail to
comply with section 72516, subdivision (d). Rather, they distinguish the cases
applying Health and Safety Code section 1363.1 on the ground that they rely on the
language of that section alone. But the distinction is unpersuasive. The display
requirements of sections 1599.81 and 72516, like that of Health and Safety Code
section 1363.1, are mandatory, and are designed to ensure a binding arbitration
agreement. That is, the statutory mandate that a nursing facility’s admission
agreement “clearly indicate” that consent to arbitration is not required (§ 1599.81,
subd. (a)), and the regulatory requirement that this admonition be in a prominent
place at the top of the agreement in bold-face font of not less than 12 point type
(§ 72516, subd. (d)), ensure that the resident voluntarily waives the right to a jury
trial and consents to arbitration without the compulsion inherent in the belief that
such consent is required for admission to the facility or receipt of treatment. The
Legislature has decreed that facilities must use the standard agreement created by
Department regulations (Health & Saf. Code, § 1599.61, subd. (a)), and that
facilities cannot alter it unless permitted by the Department (id., subd. (b)(1)). It
would violate the purpose of the statutory and regulatory requirements to permit
arbitration to occur despite the failure to comply with the display of a disclosure
designed to ensure a valid arbitration agreement. (See Malek, supra, 121
Cal.App.4th at pp. 69-70.) Thus, like courts applying the arbitration disclosure
requirements for health care service plans (Health & Saf. Code, § 1363.1), we
conclude that the arbitration agreements involved here are unenforceable for failure
6
to comply with the disclosure requirement of section 1599.81, subdivision (a), as
implemented by 72516, subdivision (d).
Further, the doctrine of substantial compliance, which “excuses literal
noncompliance only when there has been ‘actual compliance in respect to the
substance essential to every reasonable objective of the statute’” (Robertson,
supra, 132 Cal.App.4th at p. 1430), does not save either arbitration agreement. As
we have noted, the primary objective of requiring the highlighted disclosure is to
ensure a voluntary waiver of the right to a jury trial, with knowledge that consent
to arbitration is not required for admission to the facility or receipt of treatment.
Hence, the absence of a properly displayed disclosure casts doubt on the validity of
the arbitration agreement. (See Zembsch, supra, 146 Cal.App.4th at p. 166.)
Under these circumstances, as has been held in the context of Health and Safety
Code section 1363.1, the failure to highlight the disclosure precludes a finding of
substantial compliance. (Id. at pp. 166-167.)
DISPOSITION
The order denying the petition to compel arbitration is affirmed.
CERTIFIED FOR PUBLICATION
WILLHITE, J.
We concur:
EPSTEIN, P. J.
\
MANELLA, J.
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