Rayhrer v. Cmty. Mem'l Health Sys.

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CONSTANZE RAYHRER, Plaintiff and Respondent, v. COMMUNITY MEMORIAL HEALTH SYSTEM, et al., Defendants and Appellants

2d Civil No. B324707

California Court of Appeals, Second District, Sixth Division

June 24, 2024

NOT TO BE PUBLISHED

Superior Court County of Ventura, No 56-2022-00565843-CU-OE-VTA Ronda J. McKaig, Judge

Sheppard, Mullin, Richter & Hampton and Richard J Simmons, Tyler J. Johnson, for Defendants and Appellants.

Law Offices of Brian R. Weilbacher and Brian R. Weilbacher, for Plaintiff and Respondent.

YEGAN J.

Community Memorial Health System (CMHS) appeals the trial court's order denying its petition to compel arbitration of Constanze Rayhrer's complaint alleging violations of the Fair Employment and Housing Act (Gov. Code, § 12900, et seq.) ("FEHA") and the Labor Code. CMHS contends the trial court erred when it found Rayhrer's claims fell outside the scope of the arbitration provisions included in the parties' many written agreements. Rayhrer contends the arbitration provisions do not apply because her claims are statutory and not based on the contracts. She further contends the arbitration provisions are unconscionable and, therefore, unenforceable. We agree with the trial court that Rayhrer's claims fall outside the language of the various arbitration provisions. Because we conclude Rayhrer's claims are not subject to arbitration, we do not reach the question whether the arbitration provisions are also unconscionable. We affirm.

Facts

In 2008, Rayhrer and CMHS signed a Physicians Services Agreement under which Rayhrer agreed to provide on-call coverage services as a physician in CMHS's emergency department. As relevant here, the agreement described Rayhrer as an independent contractor and provided that it would be "governed by and construed in accordance with the laws of the State of California." A paragraph entitled "Disagreements," provides, "Questions or disagreements concerning the terms of this Agreement shall be submitted to the Chief Financial Officer [and then] to the Chief of Staff and Chief Executive Officer for resolution. If such disputes or questions still are not resolved satisfactorily, then they shall be submitted to and resolved by binding arbitration." This agreement was amended many times, with each amendment leaving the independent contractor, governing law and arbitration provisions "in full force and effect."^[1]

Beginning in 2012, the parties signed annual letter agreements under which Rayhrer agreed to serve as a Teaching Physician in CMHS's Graduate Medical Education program, training medical students and residents in general surgery. The letter agreements describe Rayhrer as an independent contractor and provide that they will be "construed, interpreted and enforced" under California law.

Each letter agreement also includes a "Dispute Resolution" provision. These provisions state, "Should any questions or disagreements arise under this Agreement, CMHS and Teaching Physician agree at the request of either party, to meet and confer in good faith concerning the issues in question within thirty (30) days of such a request. Should the parties be unable to resolve such disagreements in this manner, the matter shall be submitted to final and binding arbitration ....THE PARTIES UNDERSTAND AND AGREE THAT THEY ARE WAIVING ALL RIGHTS TO TRIAL BY JURY."

In 2017 and 2018, the parties signed letter agreements appointing Rayhrer the Associate Program Director for general surgery. With the exception of the job title, these letter agreements are identical to the teaching physician letter agreements.

Rayhrer's complaint alleges that she was misclassified as an independent contractor and that CMHS violated both FEHA and the Labor Code when it refused to promote her to Program Director in general surgery and illegally demoted her from Associate Program Director to Teaching Physician. She further alleges that CMHS's conduct discriminated against her, harassed and retaliated against her based on her gender and that she was wrongfully terminated in violation of FEHA and the Labor Code.

CMHS filed a petition to compel arbitration. While it has not specified which of the parties' written contracts applies here, CMHS contends the arbitration provisions apply broadly to encompass Rayhrer's misclassification and statutory claims. Rayhrer contends her claims are not within the scope of the arbitration provisions because she is not alleging a breach of any of the agreements; she alleges that CMHS violated rights conferred by statute.

The trial court agreed with Rayhrer and denied the petition to compel arbitration. While it found the agreements are not unconscionable, it concluded their arbitration provisions were too narrowly drafted to encompass Rayhrer's statutory claims.

Standard of Review

The question whether the parties' written agreements contain enforceable arbitration provisions that require arbitration of the causes of action alleged in Rayhrer's complaint is one of law. We review the matter de novo. (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 60 (Avery); Coast Plaza Doctors Hosp. v. Blue Cross of California (2000) 83 Cal.App.4th 677, 684.)

Discussion

Both the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and the California Arbitration Act (Code Civ. Proc., § 1280 et seq.) express a basic policy favoring the enforcement of valid arbitration agreements. (Morgan v. Sundance, Inc. (2022) 596 U.S. 411, 418; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97, abrogated in part on another ground in AT & T Mobility LLC v. Concepcion (2011) 563 U.S. 333, 340-341.) "The fundamental policy underlying both acts 'is to ensure that arbitration agreements will be enforced in accordance with their terms.'" (Avery, supra, 218 Cal.App.4th at p. 59, quoting Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 836, fn. 10.)

As the Supreme Court noted in Morgan, arbitration agreements are "'as enforceable as other contracts, but not more so.'" (Morgan, supra, at p. 418, quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967) 388 U.S. 395, 404, fn. 12.)

In deciding whether parties have agreed to arbitrate a particular dispute, "courts generally . . . should apply ordinary state-law principles that govern the formation of contracts." (First Options of Chicago, Inc. v. Kaplan (1995) 514 U.S. 938, 944.) Because arbitration is "a matter of consent, not coercion," parties may limit by contract both the issues subject to arbitration and the rules under which arbitration will proceed. (Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University (1989) 489 U.S. 468, 479; see also Pinnacle museum Tower Assn. v. Pinnacle Mkt. Dev. (US), LLC (2012) 55 Cal.4th 223, 236.) "Where, as here, the parties have agreed to abide by state rules of arbitration, enforcing those rules according to the terms of the agreement is fully consistent with the goals of the FAA, even if the result is that arbitration is stayed where the Act would otherwise permit it to go forward." (Volt Information Sciences, at p. 479.) Thus, we apply California law to determine whether the parties formed a valid agreement to arbitrate this dispute. (Vaughn v. Tesla, Inc. (2023) 87 Cal.App.5th 208, 218.)

California recognizes both a presumption favoring arbitrability and a requirement that arbitration agreements be enforced according to the same standards that apply to contracts in general. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-972.) Our strong policy favoring arbitrability has resulted in the general rule that arbitration should be required "'"unless it can be said with assurance that an arbitration clause is not susceptible to an interpretation covering the asserted dispute...."'" (EFund Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1321.) However, an equally well-established rule of construction provides that "where, as here, the written agreement has been prepared entirely by the employer . . . any ambiguities must be construed against the drafting employer and in favor of the nondrafting employee. [Citations.] Moreover, '[t]he rule requiring the resolution of ambiguities against the drafting party "applies with peculiar force in the case of a contract of adhesion...."'" (Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 248, overruled in part on another ground in Lamps Plus, Inc. v. Varela (2019) 587 U.S. 176.)

Here, the parties entered into two types of agreements between 2008 and 2021. All of these agreements were drafted entirely by CMHS. The record indicates their arbitration provisions were not subject to negotiation. First, the parties entered into a Physician Services Agreement and at least one amendment to it. Second, the parties entered into a series of letter agreements under which respondent agreed to serve as a Teaching Physician and Associate Program Director in appellant's Graduate Medical Education program.

Each agreement describes Rayhrer as an independent contractor and provides that the agreements will be "governed by and construed in accordance with" California law. The Physician Services Agreement provides that if "Questions or disagreements concerning the terms of this Agreement" cannot be resolved by the Chief Financial Officer, the Chief of Staff and the Chief Executive Officer, "such disputes or questions . . . shall be submitted to and resolved by binding arbitration." The Teaching Physician and Associate Program Director Letter Agreements provide, "Should any questions or disagreements arise under this Agreement, [appellant] and [respondent] agree at the request of either party, to meet and confer in good faith concerning the issues in question...