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Under California law, courts may deny a motion to compel arbitration when there is a danger of conflicting rulings in court and arbitration, and that danger is introduced by the presence of a third party not subject to the arbitration agreement, according to a California Court of Appeal.
In Goyette v. Country Villa Service Corp., No. G039580, 2008 WL 2461433 (Cal. Ct. App. June 19, 2008), Goyette entered into an arbitration agreement on behalf of her husband during his admission to Country Villa's nursing home facility. Goyette's husband died and a dispute arose over the quality of the husband's care at the facility.
Goyette, "as successor in interest" to her husband, filed claims of elder abuse, wrongful death, and violations of the California Patient's Bill of Rights against Country Villa. Country Villa was characterized in the complaint as two separate "doing business as" entities. Country Villa moved to compel arbitration of the claims. The trial court determined that third parties not subject to the arbitration agreement existed, and that there was "a possibility of conflicting rulings on common issues of fact and law between the arbitrable claim and non-arbitrable claims." The trial court exercised its apparent duty under those circumstances to deny Country Villa's motion to compel arbitration. See Cal. Code Civ. P. § 1281.2(c).
On appeal, the Court determined that the trial court's flat denial of the motion to compel could not be sustained. Specifically, the Court found the plaintiff purposefully attempted to introduce third parties into the controversy by naming herself as a successor in interest to her husband and portraying the defendant as two separate entities.
According to the Court, there was only one plaintiff and one defendant involved in the dispute. It found that Goyette was simply asserting rights she now possessed upon the death of her husband. It also found the two entities named as defendants were actually one entity; despite naming them separately as defendants, Goyette claimed the defendants were "indistinguishable" in her complaint. Without the presence of a third party, explained the Court, the trial court erred by denying the motion to compel on the grounds asserted.
However, the Court pointed to other language in the same section that granted a trial court the authority to determine whether court proceedings would "make the arbitration unnecessary," and, if so, whether the related arbitration proceedings should be delayed. See Cal. Code Civ. P. § 1281.2. It was possible, according to the Court, that the trial judge could find the resolution of the non-arbitrable issues at court would render arbitration unnecessary, so it remanded the matter for that determination.
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