California Appeallate Court Upholds Arbitration Award In Face of Multifaceted Appeal

The California Court of Appeal upheld an arbitration award over wide-ranging objections by the losing party.

In Potter v. Yorba Park Medical Group, Inc., No. G036294, 2006 WL 1725563 (Cal. Ct. App. June 23, 2006), Potter’s primary care physician at Yorba Park referred Potter to a neurosurgeon whose medical license had been temporarily revoked several years earlier. The neurosurgeon performed surgery on Potter.

Potter later sued five parties, including the neurosurgeon and Yorba Park. She claimed that the neurosurgeon was liable for medical malpractice and that Yorba Park was liable for negligently referring her to the neurosurgeon.

Yorba Park moved to compel arbitration pursuant to an expansive arbitration agreement. The trial court granted the motion and severed Potter’s claims against Yorba Park from her nonarbitrable claims against the neurosurgeon and others. The three-person arbitration panel ruled two to one in favor of Yorba Park.

On appeal, Potter raised two objections to the order compelling arbitration. First, she argued that the arbitration agreement did not apply where an “independent contractor” like the neurosurgeon was the allegedly incompetent health care provider. The Court disagreed, finding that the expansive arbitration agreement applied to the referral.

Potter also argued that the trial court erred in not staying the entire lawsuit. The Court acknowledged the possibility of conflicting rulings but noted that the trial court’s hands were tied because the protective measures set forth at section 1281.2 of the California Code of Civil Procedure do not apply to “an agreement to arbitrate disputes as to the professional negligence of a health care provider.”

In arguing that the trial court should have granted her motion to vacate the arbitration award, Potter raised four issues. She argued that the bias of the neutral arbitrator was evident from his decision to stay arbitration pending trial of the claims against the neurosurgeon. Unpersuaded, the Court noted that arbitrators enjoy “wide latitude” in governing the proceedings and that the claims against Yorba Park and the neurosurgeon were “inextricably intertwined.”

Potter also objected to the neutral arbitrator’s failure to respond to her second request for disqualification. The Court concluded that “the act of simply failing to respond to the demand for disqualification is not a sufficient reason, standing alone, to justify setting aside the arbitration award.”

Potter’s second request for disqualification was based on an allegedly false declaration prepared by the neutral arbitrator. On appeal, she argued that this proved bias. Noting “the lack of evidence [that] the declaration was false,” the Court concluded that the arbitrator was not subject to disqualification for bias.