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California Hospital Association's Lawsuit Against SEIU-UHW For Violating Terms of Secret Partnership Agreement: 1-26-16
California Hospital Association's Lawsuit Against SEIU-UHW For Violating Terms of Secret Partnership Agreement: 1-26-16
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COUNTY OF SACRAMENTO
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CaseNo.
FETrnONER CALIFORNU
HOSPITAL ASSOCIATION'S
NOTICE OF PETITION AND
PETmON TO COMPEL
ARBITRATION; MEMORANDUM
OF POINTS AND AUTHORITIES
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Petitioner,
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V.
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Respondent
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soon thereafter as may be heard, in Departmer^3^4 of the above-entitled court, located at 720
9th Street, Sacramento, Califomia, before the Honorable David 1. Brown / Raymond M. Cadei,
Petitioner CALIFORNIA HOSPITAL ASSOCIATION ("CHA") w^ill, and hereby does, petition
the Court for an Order under Califomia Code of Civil Procedure section 1281.2 compelling
arbitration before Arbitrator Richard Aheam of three complaints brought by CHA against
Respondent SEIU, UNITED HEALTHCARE WORKERS - WEST ("UHW") under the parties'
written arbitration agreement, all three of which UHW has refiised to arbitrate. As necessary,
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CHA further seeks an Order consolidating SEIU, United Healthcare Workers - West, on its own
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behalf and on behalf of Caringfor Califomians, LLC v. C. Duane Dauner, et al.. Case No. 34-
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2015-00187138-CU-CO-GDS, a lawsuit filed by UHW in the Superior Court for the County of
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Sacramento, into the arbitration or staying that lawsuit pending arbitration. The lawsuit was filed
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in violation of the parties' arbitration agreement, and the subject matter of the lawsuit includes
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many of the same facts at issue in CHA's arbitration complaints. CHA is applying to intervene in
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that proceeding to seek a separate order compelling arbitration in accordance with the parties'
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arbitration agreement.
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CHA's petition is based on this Notice of Petition and Petition, the accompanying
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Memorandum of Points and Authorities, the Declarations of F. Curt Kirschner, Jr. and Gail M.
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Blanchard-Saiger, and upon all such other matters and arguments as may be presented to the
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NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION
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with offices in Sacramento. CHA collaborates with its members to provide strong and effective
representation and advocacy to advance the interests of Califomia hospitals, patients, and
communities.
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been the President and Chief Executive Officer C X : E 0 ^ of CHA, and Gregoiy A. Adams, Mark
R. Laret, and James R. Holmes have served as CHA Officers.
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At the times relevant to the disputes at issue in this Petition, C. Duane Dauner has
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mutual benefit corporation organized under California Corporate Code sectirai 7110 el seq. at the
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On May 5,2014, CHA. UHW, and a number of Califi}mia hospitals and health
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systems entered into an agreement entitled the Code of Conduct. The Code ofConduct sought to
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"create a new model for laborrelationsthat is based on cooperation ratlwr than confrontation,"
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isuring that "eveiy oppa^tanity will be taken to resolve differences quickly and in a professional
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Substantively, each patty ^reed thitt communicatuMis about the other "[would] be
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factual and shall focus on the merits of particular policies or issues. Differences, if any, [would]
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"[would] engage in personal attacks or nuike derogatoiy comments about the oUber Party or its
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NOTICE OF PETinON ANP PETITION TO COMPEL ARMTRATION
leadership, including board members.** (Id) UHW agreed that it would not engage in "reputation
"directed at or with respect to CHA... and any of [its] officers, directon, managers or
shareholders.** (Id. I(BX2).) UHW also speciftcalty agreed that it would not "sponsor or
support legislation, initiatives, or regulatory acdon adverse to the Califomia hospital industry
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Procedurally, the Code of Conduct provided that the parties would "work
designate an Arbitrator and an Alternate Arbitrator and agreed that he or she would "resolve any
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disputes over the a|q>licatton and interpretation of this Agreement** (Id. 1II(B).) The parties
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also agreed that '*[t]he Arbitrator [would] have fmal and binding authority to enforce this
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Agreement andresolveissues that rise during the course of this Agreement.** (Id)
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On August 13,2014, CHA and UHW selected Richard Aheam as the Arbitrator
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for disputes under die Code of Cbnduct and John K ^ l as Ihe Ahem^ Arbitrator. (Blanchard-
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SaigerDecL^3.)
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to the Code of Conduct** that among other things, menKmalized the designations of Aibiiratois
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In Ihe Code of Conduct the parties also agreed "to establish an industry-wide
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Managemem Coopoation Act of 1978, for various puiposes set forth in the agreement
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(Blanchard-Saiger Decl. Ex. A, U(A).) The paities agreed diat the "hospitals and health systems
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shall designate die Chief Executive Officer ('CEO*) of CHA as dieir representative on the
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Committee; the Union shall designate die President of the Union as its representative on the
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Committee.... The Committee shall not advance any agenda widiout die approval ofthe CEO
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The Code of Conduct anticipated that signatoiy hosfutals might choose to execute
"Conditional Access Agreements,** which would provide UHW accessrightsat Califomia acute
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care hospitals in the event of "the achievement of a legislative or political solution that meets the
previously agreed upon goal of obtaining full Medi-Cal fimding and payments to hospitals for
Stmcture of Agreement (DX2).) Signatory hospitals, however, were not required to execute any
Conditional Access Agreements. (Id.) The parties agreed that "[i]n the event that by Januaiy I ,
Agreements to meet the requirement of [UHW access to] thirty thousand (30,000) non-union,
non-supervisory employees..., the Union [would] bereleasedfrom all further obligations under
this Agreement and this Agreement shall ternimate.** (Id) Upon such termination, "all of [the
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Code of Conduct's] terms are terminated widi respect to ali signatories." (Id Purpose and
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September 17,2014, and organized as a nonprofit mutual benefit corporation under Califomia's
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Nonprofit Mutual Benefit Coiporation Law. (Blanchard-Saiger Decl. Ex. B.) Article II, section
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B of CFC's Aitkles of Incorporation restated the purposes set fiirth in die Code ofConduct and
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confirmed thatforits first two years, CFC'sfocuswould be on "obtaining fiill Medi-Cal fimding
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and payments to hospitals for services rendered to Medi-Cal beneficiaries.*' (Id Art II, B.)
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CFC's Bylaws named CHA and UHW as the corporadon's two "Designators," with sole authority
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CFC's Bylaws provicte diat "[t)he President of CHA, or whoever may succeed him
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or her as chief executive officer of CHA, shall serve as Co-Chan- [of CFC*s Board of Directors]
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by virtue of his/her position.** (Id Ex. C, Art IV, 3.) CHA was also given dierightto
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designate three additional directors, each a "CHA Director." (Id) Similarly, the Bylaws alk>cate
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four directors to UHW, including establishing die I^ident of UHW as die odier Co-Chair. (Id)
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The cunent CHA Co-Chair is Dauner, and the current CHA Directors are Adams, Laret, and
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The Bylaws fuithn- provide that "[a] vacancy in a CHA Director position may be
2 filled only by CHA, and a vacancy in a SEIU-UHW Director position may be filled only by
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SEIU-UHW.** (Blanchard-Saiger Decl. Ex. C, Ait IV, 4.) All acts of die Board must be
"ei^Hoved by both Co-Chairs plus at least two of die othier CHA Directors and two of the other
SEIU-UHW Directors." (Id Art. IV. 11.) Any amendmenttodie Articles of Incorporation or
the Bylaws must be "approved in writing by the Designators." (Blanchard-Saiger Decl. Ex. B,
m.
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First Complaini
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ho^ital executives. In die email, UHW discussed a number of recent political devebpments in
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"miss out on nearly $6 billion a year in state andfederalfimding, and neariy S30 billion over the
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nextfiveyears." (Blanchard-Saiger DecL Ex. E, at 3.) UHWs message included numerous ftlse
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and derogatoiy charges about CHA diat breached the terms of die Code of Conduct (/dlat2-S.)
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On Novonber 14.2015. CHA notified UHW diat it viewed die email as a breach
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of UH Ws obligations under Section I(BXl) of die Code of Conduct to address any difTemices
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wddi CHA "in a podtive mamm^ and torefrainfiom"personal attacks" and "derogatory
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comments." (Id at 1-2.) CHA requested that UHW contact CHAtodiscuss die matter, and
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indicated that if the paities were not abletoresolve die matter promptly, CHA wouU initiate
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aibitration. (Id)
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UHW look the position that its email had not violated the Code of Conduct arguing that
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"[s]impty because CHA may disagree widi UHW's perspective does not mean that the
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dien offered CHA the options of "talk[ing] about the complaint next week" or simply
Second Complaint
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placement on die 2016 Califomia ballot As CHA explained to UHW in its November 30,2015
complaint die Unkin's decisiontosponsor the Compensation Initiative violated Sections 1(B) and
11(C) ofthe Code ofConduct and in particular UfiW's agreement not to "sponsor or support...
initiatives adverse to the Califomia hospital industry" or make comments "raising concems
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about... executive compensation in health care." (Blanchard-Saiger DecL Ex. F, at 2-3.) CHA
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recommended that the November 14 and Novonber 30 complaints be consolidated into a single
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proceeding, and asked that although the goveming aibitration procedures set a sixty-day deadline
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for arbitrationtooccur, the panics agreetoa "prompt" aibitration date. (Id at 3.)
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In its December 4,2015 res^nse, UHW argued dial UHW onployees, not UHW
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itself, had proposed the Compensation Initiative, and that CHA had not identified the statements
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of the proceedings and CHA's request for a "prompt" hearing, but assured CHA that it was
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the paities." (Id.) It only cautioned that "because of various conflicts. SEIU-UHW cannot agree
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after it discovered that UHW had established a political fimd to support die Compensation
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Initiative. (Kirschner DecL Ex. B, at 1.) CHA explained that the creation of the fimd provided
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further evidence dut UHW was theforcebehind the Compensation Initiative. (Id) CHA abo
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infonned UHW that it viewed die oeation ofthe fimd as an independent violation ofthe Code of
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Conduct (Id)
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Uiird Complaint
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The Third Complaint addresses UHW's decision to tum a diqnite over die
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management of the CFC into a lawsuit charging CHA's officers (including CHA's President)
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As agreed in the Code of Conduct CFC was created with an initial focus of
increasing Medi-Cal fiindtng. As alleged in UHWs lawsuit CHW and UHW initially proposed
coalition of employers and labor organizations... with political interests that do not align with
CFC," whicb UHW referstoas die "ABC Coalition." (Id H 4.) UHW aUeges duit CFC teamed
that the ABC Coalition was planning to propose a similar, but competing, initiativetoCFC's (id
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^ 45), and that Dauner then began "secretly working widi the ABC Coalition to undermine CFC's
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competing initiative constitutes a breach of afiduciaryduty the CHA Directors owed CFC. (Id
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in 73,90.)
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The Code OfConduct explicitly anticipated diat CHA and UHW might disagree
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regarding how besttoaccomplish die goals of die CFC by providing that CHA's and UHW's
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representatives couM veto any proposed acti(ms ofthe CFC. The Code ofConduct also provided
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a dispute resolution process that the parties agreed would govem disputes arisingfromits
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interpretation or application. Despite these provisions, UHW chosetosue Dauner and the other
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CHA Directors in court when Daun^ allegedly exercised his vetorightimpn^wrly, ratho* than
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following the dispute resolution process to whi^ the parties agreed. UHW's suit alleged that by
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working widi the "ABC Coalition" and blocking UHW from advancing its |eferred version of
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die initiative, the four CHA Directors had violated a fiduciary dutytoCFC. (Kirschner Decl. Ex.
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C, in 81 -83.) Later, UHW issued each defendant a Preservation Notice diat directed "you and
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your organization, the Califomia Hospital Association" to preserve all documents relatedtothe
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Upon learning of the lawsuit CHA notified UHW that it viewed the litigation as a
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violation of Section 1(B) of the Code of Conduct which prohibits "instigating or supporting...
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litigation" that is "directed at or with respect to CHA or signatoiy hospitals or health systnns and
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2.) CHA also noted that die inflammatoty language UHW had used in hs complaintlabeling
Dauner a "saboteur" and accusing him of "corrupt acts," for exampleconstituted a separate
directed at CHA and its officers andtoavoid "derogatoiy conunents" about CHA. (Id. at 2.)
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Unlike UHW's responsestodie First and Second Complaints, UHW claimed diat
the dispute was not arbitrable. (Blanchard-Saiger Decl. Ex. H, at 1.) Because the "fiduciaiy duty
of a not-for-profit director or ofiicer is governed by state law." UHW took the position that "the
onty way for diat dutytobe enforced is through litigation." (Id) UHW explained diat die suit
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was not a "lawsuit by UHW against CHA and its officers," but was instead "a lawsuit by UHW,
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on behalf of itself as member of CFC and on behalf of CFC, against die four directras of CFC."
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(Id.) As a secondary point UHW also claimed that the allegations in the lawsuit were not
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aibitiabilhy of the parties' disputes, and anticipated that the parties would arbitrate diese disputes
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under die Code ofConduct In responsetodie First Complaint UHW assured CHA dut it
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"wouki be more than happy to talk to [counsel] about the complaint next week or we can simply
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responsetodie Second Complaint UHW explained on December 4,2015 duit ahhough UHW
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was "certainly committedtolitigating this complaint within the 60 day time frame as negotiated
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by the parties.... because of various conflicts, SEIU-UHW cannot agreetoa hearing before the
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new year." (Blanchard-Saiger Decl. Ex. F, at 1.) In particular, UHW noted diat its counsel would
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be out ofthe countiy for "a period oftime in December 2015." (Id)
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Because UHW had infonned CHA that it was unavailable to arbitrate until January
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2016. CHA contacted Aibitrator Aheam on December 15.2015torequest hearing dates, copying
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UHW on its message. (Kirschner Decl. Ex. H, at 9-10.) Arbitrator Aheam respondedtoboth
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parties the same iSay, proposing a number of dates and offering his availability fix a sdieduling
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NOTICE OF PETITION ANtt PETITION TO COMPEL ARMTRATION
conference call any day that week. (Id. at 9.) CHA agreed that a phone call would be desirable.
(A/, at 8.)
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UHW responded die following day, changing its position as to whether die
arbitration woukJ proceed. UHW now took the position diat it was "highly remote" diat UHW
would have any duty to arbitrate any of the three complaints after January 1,2016. (Id. at 7-8.)
Specifically. UHW expressed a belief that die Code of Conduct's condition subsequent providing
that "the Union [woukl] bereleasedfrom all fiirther obligations under diis Agreement and this
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that arose before termination. (Id. at 7.) Despite taking this new position that it may have no
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obligationtoarbitrate after January 1,2016, UHW reiimted its refusaltoarbitrate any of the
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December 2015 on dates that were available for Arbitrator Aheam. (Id. at 6.) Arbitrator Aheam
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did not set the arbitrationsforthose dates, however, and instead scheduled a confoence call on
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January 4,2016to"addressQ procedural issues," and "deteimine a method for resolution." (Id at
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2.4.) He also set Januaiy 6,2016 as the hearing date for the First Complaint with die
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understanding diat UHW mightrefiisetoappear. (Id at 2.) CHA confirmed its availability for
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diis schedule, but UHW did not respond. (M at 1; Kirschner Dect. 112.)
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Three days later, UHW and CHA each participated in die conference call
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scheduled by Arbitrator Aheam. (Kirschner DecL 114.) UHW denied any obligationtoarbitrate
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CHA's pre-teimination complaints and indicated it woukl not participate in the hearing on the
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First Complaint scheduled for Januaty 6,2016. (Kirschner DecL HIS.) CHA explained its
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disagreement with UHWs position and asked Arbitrator Aheam to resolve the paities* dispute
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over arbitrability. (Kirschner Decl. ^ 16.) Arbitrator Aheam asked the partiestosubmit briefing
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NOTICE OF PETITION ANi> PE I'l HON 10 COMPEL ARBFriUTION
on the issue and indicated that he would infonn them of his mling shortly. (Kirschner Decl.
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diat because he, as die neutral, had played arolein discussions that led to the creation ofthe
hearing involving" UHW's post-termination obligation to aibitrate. (Kirschner Decl. Ex. I, at 1.)
He assured the parties, however, that he remained ready to resolve the underlying arbitration
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Arbitrator Kagel as die Altemate Arbitrator. (Kirschner Decl. Ex. IC, at 1.) UHW failed to
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For an order consolidating SEIU. United Healthcare Workers - West, on its own
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andon behalf of Caringfor Califomians, LLC v. C. Duane Dauner, etal.. Case No. 34-2015-
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OOl 87138-CU-CO-GDS, into the arbitration or staying that action pending arbitratkMi;
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NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION
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TABLE OF CONTENTS
Page
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INTRODUCTION
ARGUMENT
A. CHA and UHW Are Partiestoa Broad Art)itration Agreement
B. CHA Demanded Arbitratton of Three Disputes in November and December
2015, Each of Which Falls WidiintiieArbitration Agreement
I . UHW Concedes thai CHA's First and Second Complaints are Aibitrable
2. CHA's Third Complaint Also Is Arbitrabte
C. The Code of Conduct's Termination Does Not Extinguish UHW's Duty to
Arbiirate Disputes That Arose During the Life of the Agreement
D. The Court Should Order UHWtoArbitrate All Three Disputes.
IU.
CONCLUSION
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TABLE OF AUTHORITIES
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Bono V. David
(2007) 147 Cat.App.4di 1055
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INTRODUCTION
On May 5.2014, Califomia Hospital Association ("CHA") and SEIU, United Healdicare
Workers - West ("UHW) signed a Code of Conduct that was designedtofoster cooperatbn and
aibitration agreemait as an important meanstoachieve the parties' overall goal of ensuring that
the paities addressed differences in a "positive manner." After abiding by the terms of the
aibitration agreement for over a year, and successfully resolving other disputes pursuanttoits
lerms, UHW nowrefiisestoarbitrate three complaints brought by CHA. Its primary basis for
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doing so. applkble to all three of CHA's complaints, is that the Code of Conduct terminated on
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January 1,2016.
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disputes that arise during the course of the underlying contract even if aibitration does not occur
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until after the contract is terminated. In this sense, arbitration obligations survive the contract
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complaints before die Code ofConduct terminated. And UHW onlyrefiisedto arbitrate in
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obligations simply because the Code ofConduct has now laminated. Moreover, UHWs refiisal
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relates to the Labor Management Committee established as provided fot in the Code ofConduct
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improperly ignores the broad scope of the aibitration clause contained within the Code of
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Conduct. For the reasons explained fiirther below, the Court shouldfindall three disputes
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* The factual background of ihis dispute has been set f<xth in the accompanying Notice of
Petiticm and Petition and die Declarations of F. Curt Kirschner, Jr. ("Kirschner DecL") and of
Gail M. Blanchard-Saiger ("Blanchanl-Saiger Decl.").
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MEMORANDUM OF POINTS ANP AljTHOftl'HES
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ARGUMENT
Califomia has a "strong public policy in &vor of arbitration." (Lariin v. Williams.
WooUey. Cogswell. Nakazawa & Russell (1999) 76 Cal.App.4di 227,229.) The party opposing
arbitration has the burden "to demonstrate that an aibitration clause cannot be interpreted to
require aibitration of the dispute." (Coast Plaza Doctors Hosp. v. Blue Cross ofCal. (2000) 83
dispute are to be resolved infevorof sending the partiestoarbitration. The court shouM order
them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the
dispute." (United Trans. Union. AFUCIO v. S. Cal. R/^id Transit Dist., (1992) 7 Calj\pp.4di
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804,808.) A court must compel aibitration upon finding: (I) the existence of an aibitration
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agreement; (2) an arbitrable dispute; and (3) arefusaltoarbitrate. (See Cal. Code Civ. Proc.,
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A.
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The existence of die arbitration agreement is not in dispute. When CHA and UHW signed
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die Code ofConduct on May 5,2014, diey agreedtobe bound by Section IIl(B). Specifically,
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they agreed that a "designated Arbitrator [would] resolve any disputes ova the application and
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interpretation of this Agreement" and that "[t]he Arbitrator [woukl] havefinaland binding
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UHW does not deny having agreed to the Code of Conduct as a whole, or having entered
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into the aibitration agreement specifically. Nor does it suggest either is invalid. To the contraty,
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UHW has acknowledged thefixceof the aibitraticm agreement by arbitrating other complaints
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befim Aibitrator Aheam, as agreed by the parties. (Kirschner Decl. ^3.) And not only has
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UHW agreedtoaibitrate complaints brought against it under the aibitration agreement it has also
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used the arbitratkm agreement to foree otha partiestoarbitrate complaints brought by UHW.
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Moreover, the scope ofthe arbitration agreement is extremely broad. The parties agreed
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1 to arbitrate "any disputes over die application and interpretation" ofthe Code ofConduct, and
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agreed that an arbitrator would "havefinaland binding audioritytoenforce... and resolve issues
diat arise during the course of" die Code ofConduct (Blanchard-Saiger DecL Ex. A. III(B).)
Califomia courts have long recognized that similarly worded clauses are broadly construed to
Doctors Mgmt Co. (1994) 27 Ca]App.4di 1186,1188,1190 [clause covering "any dispute of
any kind whatsoever, regarding the meaning, interpretatkm or enforcement of tfie provisioi of
diis Agreemenf*]; see also Mnricitv. Writers Guild of Am.. W..Inc (1982) 130 Cal AppJd 212,
217,219 [clause covering any dispute "conceming the interpretation ofany ofthe terms of thb
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Basic Agreement and the applicati<i and effect of such teims as determined by an interpretation
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thereor reached tort action with "roots in tiierelationshipbetween the parties which was created
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by the collective bargainmg provisions of their agreement"].) Thus, a clause covering disputes
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"conceming die enforcement or die interpretation of any provisions of this Agreement" inchides
14 tort claims diat are not "wholly independenf' of die contract (Buckhom v. St. Jude Heritage
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diqnites over this Agreement"] [citations omitted].) As discussed betow, CHA's aibitratkm
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complaints are based onrightsaffordedtoit under the Code of C<Hiduct and fall well widiin the
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The parties' broad aibitration agreement covers each of CHA's diree complaints against
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In its SectMid Complaint CHA alleged lhat UHW's sponsorship and support ofthe
Ho^ital Executive Compensation Act of 2016 violated SectkMis 1(B) and 11(C) of die Code of
Conduct by which UHW agreed not to "sponsor or support... initiatives adversetothe
Califomia hospital industiy" or make comments "raising concems about... executive
compensation in health care." (Blanchard-Saiger Decl. Ex. F, at 2-3.) UHW responded diat for
various technical reasons, the alleged acts dM not violate the Code of Conduct's ternis. (Id. at 1.)
With respecttoboth complaints, die controvosy between the parties b over the proper
application and inteipretation oftiie leims of the Code of Conducta dispute thatfellssquarely
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^ CHA initially asked Arbitrator Aheam to decide aibitrability because the Code provides
ttiat the aibitrator would have "final and binding authority"to"enforce" and resolve "any
disputes" arisingfromthe inteipretation or ^iplicab'on of die Code. Aibitrator Ahearo's decision
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to respondtoCHA's requesttosubmit the paities* disputestoAibitrator Kagel, has forced CHA
27 tofilethis petitiontocom^ aibitration. Aibitrator Aheam has agreedtoaibitrate the merits
once the parties' arbitrability dispute is resolved. Byfilingthis petition, CHA does not waive its
28 rigiht to sedcartNtratk>n ofany dispute arising under the Code ofConduct
4
MEMORANDUM OP POINTS ANP AUTHORITIES
25
widiin the scope of the aibitration agreement InfeetUHW has conceded that the underlying
disputes are bodi aibitrable. (See Blanchard-Saiger Decl. Ex. E, at 1 [UHW suggests diat CHA
"simply contact the Arbitratortoschedute an aibitration" and advises that UHW believed that "an
in person arbitrati<Mi with wimesses will be necessary"]; id Ex. F, at 1 [UHW explains lhat the
7
8
9
2.
CHA's Third Complaint concems the lawsuit UHW brought against four CHA officers,
accusing them of violating afiduciaryduty to CFC and committii^ various torts. Among the
10
11
12
(Blanchard-Saiger DecL Ex. A, I(BX2).) CHA contends UHWs bwsuit breaches dib
13
provision; UHW contends otherwise. Put another way, the parties disagree over the proper
14
interpretation and applicatkm of Section I(BX2). Thus, their disputefellssquarely within the
15
16
The derogatory language UHW uses in its lawsuit constitutes an additional breach of the
17
Code of Conduct and provMes an indepoident basistocompel aibitration. UHWs suit includes
18
numerous disparaging statonents atXHit CHA and its officeis and direct<5. (See, e.g., Kirschner
19
Decl. Ex. C. m 1,59,61,64,82.) As CHA pointed out in its aibitration compbim, diere b little
20
doubt diat in making such statements, UHW las breached Section II(BXl) and (2), which
21
22
23
UHWs only response on this point has been that the allegations in the suit are not
24
derogatory or disrespeafiJi because, in UHWs view, thqr are troe. CHA, of course, disagrees,
25
which is why the parties bave a dispute. UHW has never argued lhat the dispute over whether its
26
27
scope of the arbitration clause. Nor could it In that way, diere is no meaningfiil difference
28
between this dispute and CHA's Firat CtHnplaint In fiict the negotiations over Medi-Cal fimding
5
MEMORANDUM OF POINTS ANP AUTHORITIES
1 fiom which UHWs letter accused Daiuier of "folding" and "feiling" are the very same
2
actions" and "soM hb veto power as a Co-Chair of CFC." (Compare Blanchard-Saiger Decl. Ex.
E, at 2-5 widi Kirschner Decl. Ex. C ^ 69,75.) Having admitted die aibitrability of die First
UHW has contended thb dilute b not artiitrable because it sued CHA's oflicers in their
capacity as CFC directors. (See Blanchard-Saiger Decl. Ex. H, at I.) This asserted exception has
no basis under the Code ofConduct UHW agreed that it wouM not initiate litigatkm against any
ofCHA's officers, and UHW has done just that There is no carve-out permitting UHW to
10
initiate litigation against CHA officers duetotheir participatkm in the CFC. Andtoread such an
11
exception into the Code of Conduct would defeat the purpose of the agreement which {vovided
12
for both die creation of CFC (with half of its directors comingfromCHA) and the bar on
13
14
15
four defendants are identified in the c<Hnplaint as CHA directors and officers. (See Kirschner
16
17
board precisely because of the positions they hold widi CHA, as anticipated by the Code of
18
Conduct (See ICirschner Decl. Ex. C132; see also Blanchard-Saiger 1^1. Ex. A II(AX1)
19
("Signatoiy bospitab and healdi systems shall designate die Chief Executive Officer ('CEO*) of
20
CHA as dieir representative on the committee." and the parties may "mutually agreeQ to
21
22
23
(Kirchner DecL Ex. C m 4-5), and that the other three defendants are "subordinate to Defendant
24
Dauner in the CHA... hierarchy" (id 132), and "agreedtosupport Dauner" in his plan (id %
25
72). Similariy, the Preservation Notices UHW issuedtoeach defendant were directedto"you
26
and your organization, the Califomu Ho^ital Associatkm." (See Kirschner Decl. Exs. IM!.)
27
28
Code of Conductconclusively establidies that the defendants woe sued because ofIheir
6
positions widi CHA, and the lawsuit as a whole b one "directed at" CHA. (See Blanchard-Saiger
UHW*s claim that the dispute b not aibitrable because UHW sued in its capacity as a
CFC member is no more convincing. Assuming arguendo UHW has standingtobring an action
on CFC*s behalf (which it does not), UHW has brought the lawsuit also in its own capacity.
(Kirschner DecL Ex. C H 6.). Indeed, UHW alleges that it has been "uniquely" injured in its own
7 right (Kirschner Decl. Ex. C H 97.) Any possibte basb UHW could havetoassert claims on
8
behalf of die CFC would arisefromthe Code ofConduct (Blanchard-Saiger Decl. Ex. A, I](A)
[providing for the creatkui of CFC].) UHW*s allegations are inextricabty tied to the Code of
10
Conduct
11
12
the officers and directors of CFC responsible" for alleged breaches of theirfiduciaiydutytoCFC,
13
and tfaat "the only way for that duty to be enforced is through litigation" (Blanchard-Saiger Decl.
14
15
enforcing Califimiia law. (See Madden v. Kaiser Found Hosps. (1976) 17 Cal.3d 699,706-07
16
17
18
19
20
21
In short, CHA's Third Complaint is as arbitrable as the First and Second Complaints.
22
C.
23
24
25
26
27
UHW has contended lhat its aibitration obligations for all of the disputes ended when the
Code of Conduct teiminated on January 1,2016. (Kirschner Decl. ^ 15.) UHWs position is
wrong: di^tes following die tenninatkm of an agreement with an aibitration clause are
presumed aibitrabte where the dispute involvesfectsand occurrences tfaat arose hefon expiration.
(See Litton Fin. PrirOingDiv., Inc. v. NLRB, (1991) 501 U.S. 190,205-06; see also^/MAZ, supra.
28
7
MEMORANPUM OF POINTS ANP AUTHORITIES
87 Calj\pp.4di at pp. 545-46 [relying on Litton and "expressly hold[ing] that a paity*s
contractual duty to aibitrate dii^utes may survive termination of the agreement givingriseto that
duty"].) There are "'strong reasons*" for diis presumption. (Ajida, supra, il CalApp.AA at p.
546 [<\}iotm$ Nolde Bros. Inc.. v. Bakery Workers (1977) 430 U.S. 243,252].) Odierwise, any
partytoa contract containing an arbitration agreement could avoid its dutytoaibitrate a dispute
by terminating the contract and filing suit the next day. (See Nolde Bros., supra, 430 U.S. at p.
252.) A party could even withdraw from ongoing aibitration if it feared a poor result (See id.)
The facts and occurrences underlying each of CHA*s aibitration compbints arose before
the Code of Conduct terminated. Indeed, CHA initbted, and UHW answered, each complaint
10
before January 1,2016. Thus, each complaint is presumptively arbitrable. (See Coast Plaza,
I\
supra, 83 Cal App.4th at pp, 915-16 [ordering arbitration of dbpute arisingfiiominsurer's alleged
12
13
provMer's decision to terminate entire contract after negotiations broke down but before filing
14
suit]; Operating Eng 'rs Local Union No. 3 v. Newmont Min. Corp. (9di Cir. 2007) 476 FJd 690,
15
693 [ordering arbitration where parties* dispute ''involve[d] facts and occurrences diat arose
16
17
UHW appears torelyon a condition subsequent in the Code of Conduct providing that in
18
the event "an insufficient number of hospitab or health systems execute Conditional Access
19
20
Code of Conduct "the Union shall bereleasedfiomall further obligations under this Agreement
21
and diis Agreemem shall terminate." (Kirschner DecL Ex. H. at 5,7.) But that language does not
or arising out of [the contrs;t] diall extoid beyond its termination.*" (Gen. Drivers, Local Union
25
No. 984 V. Mahne & Hyde (6di Cir. 1994) 23 F.3d 1039, 1045-46 [constming aibitration clause
26
27
28
where a dbpute arose while the [contract] was in effect and die resuhing grievance procedure was
initiated and well under way before" the agreement tominated. (Id at 1046.)^ Indeed, if a
for post-tmnination arbitration, an exception that would swallow the mle. Thb b not the bw:
the agreement affords a basis for concluding diat diey intendedtoaibitrate all grievances arising
10
11
12
had an agreementtoarbitrate, and whether their dispute is <me that falb within the scope of the
13
arbitration agreement To that end, die Califomia Supreme Court has endorsed the view that "an
14
aibitiatifm clause is separable from other portions of a contract" (Sairu Agnes Med Ctr. v.
15
16
racpressly grants the artritrator "final and binding audioritytomforce dib Agreement and resolve
17
issues tha rise during the course of this Agreement" (Blanchard-Saiger Decl. Ex. A, ni(B)
18
[emphasis added).) It does not require that die Code of Conduct remain in effect during
19
aibitration. The Court should not import a condition subsequentfroma separate part ofthe
20
21
contract is in effect. (See Saint Agnes Med Ctr., supra, 31 Cal.4di at p. 1199 [explaining that
22
"the separable nature of aibitration agreements compel[led it] to conclude" that a party's
23
24
25
26
27
28
* See abo Homestake LetulCo. of Mo. v. Doe Rm Restaurant Cwp. (N.D. Cal. 2003) 282
F.Supp.2d 1131.1139-40 (provisitm that partna would "no longer [tw] subjecttoany obligations
under the Paitaoship Agreeinent arising" after a transfer of paitaership shares "fiee^d]
Homestakefromany new contractual obligati(xis following tfae transit of its share m tfae
paitiiership, but it does notrelieveH<nestake ofits preexi^g dutytoaccept aibitrotton") and N.
Cal. Dist. Council of Hod Carriers v. Pa Pipeline, Inc. (1980) 103 CalApp.3d 163.172
("Termination of a collective bargaining agreement does not extinguish the dutytoarintrate if a
dispute arose during die life of die agreement").
mm
perfonnance or breach of" a contract remained, notwithstanding its claim diat a condition
December 4, 2015, UHW responded to the Second Complaint by assuring CHA diat it was
but asserted that the arbitration hearing wouM have to be held in "the new year." (Bbnchard-
Sdger Decl. Ex. F, at 1.) In making diese statements, UHW gave no indbation that it believed it
would not have a dutytoarbitrate in "the new year," even though, as UHW later confirmed, CHA
10
had previously informed UHW tfaat it was "highly remote" tfaat the Code of Conduct would
11
survive January 1,2016. To the contraty, UHWs statements appear designed to assure CHA that
12
UHW would live up to its contractual obligations and that CHA's disputes would be arbitrated in
13
due course. Based on UHWs representations, CHA contacted Aibitrator Aheam in December
14
2015 to schedule arbitration hearings on all three complaints in January. (Kirschner DecL Ex. H,
15
at 9-10.)
16
Only after Aibitrator Aheam proposed several January dates for hearings did UHW
17
express its intention torefusetoarbitrate any disputes after die Code of Conduct terminated. (Id.
18
at 7-8.) Even though UHW stated on December 4,2015 diat it was not avaibble to arbitrate any
19
dispute during the month of December. UHW waited until December 16toinform CHA and
20
Arbitrator Aheam that it would likely not be obligated to arbitrate after January 1,2016. (Id.)
21
This kind of gamesmanship b exactly what the Supreme Court wamed against in Nolde Brothers,
22
and why California's "statoloty [arbitration] scheme... explicitiy recognizes that written
23
24
25
Finally, UHW assured CHA diat UHW would comply widi its obligationtoarbitrate and
26
27
28
UHWtonow reverse course, and escape aibitration through an alleged loophole of its own
manufecture. (See Cedars-Sinai Med Ctr. v. Shewry (2006) 137 Cal. App. 4di 964,987 ["The
doctrine of equitable estoppel provides that a person may not deny the existence of a state of facts
belief to his detriment**].) This dispute should be retumedtoAibitrator Aheam so that the parties
D.
pending court action... widi a third party, arising out of tbe same transaction . . . and there is a
10
possibility of conflicting mlings on a common issue of law or fact" Califomia Code of Civil
11
Procedure section 12812(c) provides a narrow exception to the mandatoty nature of orders to
12
compel aibitration. Rather than requiring an order to compel arbitration, subsection (c) provides
13
courts some discretion in determining whether the parties' dispute should be resolved in court or
14
aibitration. Courts have explained, however, that thb "third party" exemption must be "construed
15
to mean a [third] party that is not bound by the aibitration agreement" or cannot "enforce" it.
16
(Laswell v. AG Seal Beach. LLC (2010) 189 Cal. App. 4di 1399, 1407.) Because Dauner, Adams.
17
Laret and Holmes are agents of CHA, and because UHWs allegations of misconduct are
18
inextricably intertwined with duties imposed by the Code ofConduct those individuals can
19
enforce die aibitr^on agreement against UHW. As a result they are not "ihird panics" whose
20
presence b sufficient to triggo- the section 1281.2(c) exemption. An order compelling aibitration
21
b mandatoiy.
22
23
And even if DaunCT, Adams, Laret and Hobnes were properly characterized as diird
parties, die Court should not allow UHW to use the fact that itfiledsuit against diose individuals
24 to sMestep its obligation to arintrate CHA's Compbints here. CHA served all three of its
25
aibitration complaints before UHW effected service of its bwsuit and. in any event litigatkm is at
26
27
^ 6.) Neidter the parties nor the court would be prejudbed by an order c<npelling arbitration.
28
Nor wouM an ordertoc(Mnpel aibitration prejudice any third paities. Indeed, CHA will seek
11
-mm
leavetointervene in dte lawsuit shortly and, together with the Individual Defendants, will move
UHWs decisiontofilesiut against Dauner and tfae Individual Defendants was a breach of
its obligations under the Code ofConduct including its obligationtoarbitrate. UHW has further
breached its continuing obligations under the Code of Conduct's artiilration agreement by
6 refiising to aibitrate issues tfaat arose during the life of the parties' agreonent An order allowing
7
litigation rather than aibitration to proceed would tum the parties' aibitration agreement on its
Itead. In such circumstances, tfae Court should use any discretion it may have under section
1281.2(c)toorder ali of the parties* disputes into a single artiitration or, at a minimum, stay
10
UHWs suit until the CHA*s complaints are resolved in arbitration. (See Coast Plaza Doctors,
11
si^tra, 83 Cal.App.4th at p. 693 ["A stay is appropriate where (i]n the absence of a stey, the
12
continuation of the proceedings in the trial court dismpts the arbitration proceedings and can
13
14
DL
15
CONCLUSION
For these reasons, CHA's PetitkMitoOrnipel Arbitration should be granted, and
16
proceedmgs in SEIU. United Healthcare Workers - West, on its awn andon behalfof Cari/^fbr
17
18
19
20
21
22 ,
Altom^s for Petitioner
CALIFORNIA HOSPITAL ASSOCIATION
23
24
2S
26
27
NAf-l3O07SI74lv6
28
12
MEMORANPUM OF POINTS ANP AUTHORITIES