Reported / Citable
Background
Kathleen Charles, a dementia patient who was generally in good health, was admitted to the memory care wing of WellQuest Elk Grove, LLC. Her family informed staff that she was a wanderer and required close monitoring. Three days after admission, on a 102-degree day, Kathleen was found unattended in a courtyard, comatose with burns over 23 to 25 percent of her body and an internal temperature of around 105 degrees. She died four days later.
Eight months after Kathleen’s death, her family filed a lawsuit against WellQuest. Kathleen’s niece Erika Wright, acting as successor in interest, brought survivor claims for elder neglect, negligence, fraud, and tort per se under Penal Code section 368. Kathleen’s brother and other relatives also brought wrongful death and negligent infliction of emotional distress claims in their individual capacities.
WellQuest moved to compel arbitration based on a five-page admission agreement that Erika had signed on Kathleen’s behalf under a durable power of attorney. The agreement provided for arbitration in accordance with the Federal Arbitration Act, contained a delegation clause assigning arbitrability questions to the arbitrator, and required arbitration of personal injury and wrongful death claims. The trial court denied the motion, ruling that the family members’ individual claims were not arbitrable because they were not parties to the agreement, and that the survivor claims should not be compelled to arbitration under Code of Civil Procedure section 1281.2, subdivision (c), because of the risk of conflicting rulings on common issues. WellQuest appealed.
The Court’s Holding
The Third District Court of Appeal affirmed. The court rejected WellQuest’s argument that the delegation clause unmistakably assigned the arbitrability question to the arbitrator. While the agreement did contain language about delegating issues to the arbitrator, it was not sufficiently clear and unmistakable to overcome the default rule that courts decide arbitrability when nonparties to the agreement are involved. The family members had not signed the agreement in their individual capacities and there was no clear delegation of arbitrability over their claims.
The most important published holding concerned the application of section 1281.2, subdivision (c). That California provision allows a court to deny arbitration where there is a possibility of conflicting rulings on common issues of law or fact. The Federal Arbitration Act has no comparable provision, and the question is whether parties who select the FAA in their arbitration agreement can avoid section 1281.2 altogether. The court held that California arbitration procedural rules apply by default to California arbitration agreements unless the parties expressly state otherwise.
Following Valencia v. Smyth and other cases, the court explained that an arbitration agreement’s reference to the FAA generally incorporates federal substantive law, but procedural matters in California courts are governed by the California Arbitration Act unless the parties make a clear, express choice of FAA procedural rules. WellQuest’s agreement did not expressly opt out of California procedural law, so the trial court was within its discretion to apply section 1281.2 and deny arbitration based on the risk of conflicting rulings between the survivor claims and the wrongful death claims.
Key Takeaways
- Family members who did not personally sign an arbitration agreement on their own behalf are generally not bound to arbitrate their wrongful death or NIED claims even if their relative agreed to arbitration.
- An arbitration agreement’s delegation clause must be clear and unmistakable; ambiguity, especially as to nonparties, is resolved in favor of judicial determination of arbitrability.
- California Arbitration Act procedural rules, including Code of Civil Procedure section 1281.2, subdivision (c), apply by default to California arbitration agreements unless the parties expressly state otherwise.
- A reference to the Federal Arbitration Act in an arbitration agreement generally incorporates federal substantive law but does not, by itself, displace California procedural law in state court.
- Section 1281.2, subdivision (c), gives trial courts meaningful discretion to deny arbitration in elder care cases where survivor and wrongful death claims raise overlapping issues.
Why It Matters
This decision has significant implications for elder care and skilled nursing facilities that rely on admission-stage arbitration agreements. Defense lawyers should not assume that selecting the FAA in the agreement allows them to bypass California section 1281.2 or to compel non-signing family members to arbitrate. Plaintiffs’ lawyers handling wrongful death and elder neglect cases now have a fully briefed Court of Appeal opinion supporting their use of section 1281.2 to keep cases in court when there is a risk of conflicting rulings.
For arbitration drafters, the lesson is that opting out of California procedural rules requires express, clear language. A bare reference to the FAA is not enough. The opinion will likely encourage facilities to revise their admission agreements with clearer language, but plaintiffs and the courts now have a strong basis to keep these complex elder neglect and wrongful death cases on a single litigation track.