BROUGHTON v. CIGNA HEALTHPLANS OF CALIFORNIA

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Court of Appeal, Second District, Division 4, California.

Adrian BROUGHTON, Jr., a Minor, etc., et al., Plaintiffs and Respondents, v. CIGNA HEALTHPLANS OF CALIFORNIA et al., Defendants and Appellants.

No. B093517.

Decided: July 22, 1997

Hammond, Zuetel & Cahill, Kenneth R. Zuetel, Jr. and Cynthia L.K. Steele, Pasadena, for Defendants and Appellants. Mazursky, Schwartz & Angelo, Christopher E. Angelo, Los Angeles, Watkins & Stevens and Steven B. Stevens, Los Angeles, for Plaintiffs and Respondents.

In this appeal we are asked to determine whether an arbitration clause in a health insurance policy issued by Cigna Healthplans of California (Cigna) compels arbitration of a cause of action for violation of the California Consumers Legal Remedies Act (the Act), Civil Code section 1750 et. seq.  We conclude that it does not because the Act provides a right to a judicial proceeding and specifies that its provisions cannot be waived.

FACTUAL AND PROCEDURAL SUMMARY

Plaintiffs are a minor, Adrian Broughton, Jr., through his guardian ad litem, Keya Johnson (his mother) and Ms. Johnson on her own behalf.   Adrian and his mother were covered by Medi-Cal, which had negotiated a contract with Cigna for health care coverage.   The complaint against Cigna alleges a first cause of action for medical malpractice, based on severe injuries claimed to have been suffered by Adrian at birth.1  The second cause of action alleges a violation of the Act, on the ground that Cigna deceptively and misleadingly advertised the quality of medical services which would be provided to plaintiffs under its health care plan.   Specifically, plaintiffs allege that Ms. Johnson received substandard prenatal medical services, and that she was denied a medically necessary Cesarean delivery.

Cigna answered the complaint, and filed a combined motion to compel arbitration and verified petition for an order requiring plaintiffs to arbitrate the controversy.   Cigna relied on the mandatory arbitration provision in its Combined Evidence of Coverage and Disclosure Form. That clause provides:  “Any controversy between Group, a Subscriber or Dependent Subscriber (whether a minor or an adult), or the heirs-at-law or personal representatives of a Subscriber or Dependent Subscriber and the Healthplan (including any of their agents, employees, or providers) shall be submitted to arbitration.   This applies whether involving a claim in tort, contract or otherwise.”   Cigna cited Code of Civil Procedure section 1281 which provides:  “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.”

Plaintiffs opposed the motion.   They argued that the there was no evidence of an agreement to arbitrate between themselves and Cigna;  the case does not come within the statutes governing arbitration of a medical malpractice claim;  Cigna waived the right to arbitrate by litigating motions before the trial court;  and the second cause of action under the Act is not subject to arbitration.   In support of the last argument, plaintiffs cited Civil Code section 1751, a part of the Act:  “Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.” 2  In its reply, Cigna did not address the argument that a cause of action under the Act is not subject to arbitration.

The trial court severed the causes of action, granted the motion to compel arbitration of the medical malpractice cause of action, but denied the motion as to the cause of action under the Act. Cigna filed a timely notice of appeal from the order denying its motion to compel arbitration of the second cause of action for violation of the Act. The order granting the motion to compel arbitration of the first cause of action is not appealable and plaintiffs have not attempted to cross-appeal.   The appeal before us is confined to review of the order denying arbitration of the second cause of action.  (See Mid-Wilshire Associates v. O'Leary (1992) 7 Cal.App.4th 1450, 1453, 9 Cal.Rptr.2d 862;  United Firefighters of Los Angeles v. City of Los Angeles (1991) 231 Cal.App.3d 1576, 1581-1582, 283 Cal.Rptr. 8.)

DISCUSSION

This is the second recent case in which we have been asked to determine whether an insurer can compel arbitration of a statutory cause of action under a mandatory arbitration clause in a health insurance plan.   In Wolitarsky v. Blue Cross of California (1997) 53 Cal.App.4th 338, 61 Cal.Rptr.2d 629, we decided that an insurer may compel arbitration of a cause of action for violation of the Unruh Civil Rights Act (Civ.Code, § 51).   The Wolitarskys alleged that they were the victims of gender discrimination within the meaning of the Unruh Civil Rights Act, and cited Civil Code, section 52, subdivision (e) in an attempt to avoid mandatory arbitration under the broad arbitration clause contained in their policies with Blue Cross.  Section 52, subdivision (e) provides:  “Actions under [the Unruh Civil Rights Act] shall be independent of any other remedies or procedures that may be available to an aggrieved party.”   We concluded:  “The statute does not provide, however, that parties may not agree to submit such claims to arbitration.   The Wolitarskys cite no case for the proposition that an Act claim does not come within a broad contractual clause under which the parties agree to submit ‘any dispute ․ regarding the decision of Blue Cross' to arbitration.”  (53 Cal.App.4th at p. 346, 61 Cal.Rptr.2d 629.)

As we did in Wolitarsky, we apply established standards of statutory construction:  “ ‘[O]ur first task in construing a statute is to ascertain the intent of the Legislature so as to effectuate the purpose of the law.   In determining such intent, a court must look first to the words of the statute themselves, giving to the language its usual, ordinary import and according significance, if possible, to every word, phrase and sentence in pursuance of the legislative purpose.   A construction making some words surplusage is to be avoided.   The words of the statute must be construed in context, keeping in mind the statutory purpose, and statutes or statutory sections relating to the same subject must be harmonized, both internally and with each other, to the extent possible.  [Citations.]   Where uncertainty exists consideration should be given to the consequences that will flow from a particular interpretation.  [Citation.]   Both the legislative history of the statute and the wider historical circumstances of its enactment may be considered in ascertaining the legislative intent.  [Citations.]’  (Dyna-Med, Inc. v. Fair Employment and Housing Com. (1987) 43 Cal.3d 1379, 1386-1387 [241 Cal.Rptr. 67, 743 P.2d 1323].)”  (Ibid.)

The question of whether an insurer may compel arbitration of a cause of action under the Act is one of first impression.   The Act was enacted in an attempt to alleviate social and economic problems stemming from deceptive business practices, which were identified in the 1969 Report of the National Advisory Commission on Civil Disorders (Kerner Com.).  (See Reed, Legislating For The Consumer:  An Insider's Analysis Of The Consumers Legal Remedies Act (1971) 2 Pacific L.J. 1, 5-7, hereafter “Reed.”) Section 1760 of the Act contains an express statement of legislative intent:  “This title shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.”

Remedies under the Act are cumulative:  “The provisions of this title are not exclusive.   The remedies provided herein for violation of any section of this title or for conduct proscribed by any section of this title shall be in addition to any other procedures or remedies for any violation or conduct provided for in any other law.  [¶] ․ If any act or practice proscribed under this title also constitutes a cause of action in common law or a violation of another statute, the consumer may assert such common law or statutory cause of action under the procedures and with the remedies provided for in such law.” (§ 1752.)

Unlike the Unruh Civil Rights Act which we considered in Wolitarsky, 53 Cal.App.4th 338, 61 Cal.Rptr.2d 629, this statute expressly provides that its protections may not be waived by the consumer:  “Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.” (§ 1751.)   This is the provision on which plaintiffs rely to support their argument that they cannot be compelled to arbitrate their cause of action under the Act, no matter how broad the arbitration clause in Cigna's plan.

Cigna's response to this argument is that arbitration merely provides a different neutral forum which does not limit the remedies available to plaintiffs:  “Instead of addressing the issue of the scope of the arbitration agreement, however, Respondents instead argue that the CLRA-in prohibiting any waiver of its provisions, which include a right to seek damages and injunctive relief-should be read to preclude arbitration of such claims.   Respondents cite no authority for such bald assertion.   Needless to say, no such authority exists.  [¶] The arbitration provision at bar neither limits the liability or obligation of Appellants, nor does it preclude an action by Respondents for damages or injunctive relief.  Beynon v. Garden Grove Medical Group [1980] Cal.App.3d 698, 707[, 161 Cal.Rptr. 146].  Instead, all the arbitration provision does is substitute ‘one neutral forum for another.’  Id.” Cigna emphasizes that there is nothing in the arbitration agreement to limit the plaintiffs' rights under the Act.

Cigna must establish that all the remedies available under the Act are available in an arbitration.   Here, plaintiffs seek compensatory and punitive damages under section 1780, subdivisions (a)(1) and (a)(4).   They also seek injunctive relief under section 1780, subdivision (a)(2), which provides that a consumer may bring an action to obtain an order enjoining all acts and practices banned by the Act.3

The problem with Cigna's argument is that an arbitrator is not empowered to give plaintiffs the injunctive relief they seek under the Act. In Badgley v. Van Upp (1993) 20 Cal.App.4th 218, 24 Cal.Rptr.2d 406, the Court of Appeal held that injunctive relief is ordinarily unavailable in a contractual arbitration.  (Id. at pp. 221-222, 24 Cal.Rptr.2d 406.)   Where a plaintiff seeks to enjoin deceptive business practices under the Act, it is plain that an arbitrator is not in a position to award injunctive relief or to perform the critical function of monitoring any violations of the injunction by the defendant.   The trial court must be available to the plaintiffs if it becomes necessary for them to take further steps to obtain enforcement of the terms of the injunction.

Cigna's reliance on Beynon v. Garden Grove Medical Group (1980) 100 Cal.App.3d 698, 161 Cal.Rptr. 146 is misplaced.   The passage cited by Cigna is actually from a discussion of Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 131 Cal.Rptr. 882, 552 P.2d 1178:  “[W]hile the Madden court determined that the Kaiser plan lacked the basic attributes of an adhesion type contract and that therefore the plaintiff state employee was bound by the arbitration provision even though she had no actual knowledge that it had been made a part of the contract, the court emphasized that the arbitration provision of the Kaiser plan was one which bore equally on both parties, did not limit the insurer's liability or obligation, and was one which merely substituted one neutral forum for another.”  (100 Cal.App.3d at p. 707, 161 Cal.Rptr. 146.)

Madden was an action for medical malpractice brought by a state employee who was a member of a Kaiser health care plan through her employment.   There is no indication that she sought injunctive relief in addition to damages.   In rejecting the plaintiff's argument that the arbitration clause should not be enforced as a contract of adhesion, the Supreme Court in Madden emphasized that unlike the contractual provisions considered in prior contract of adhesion cases, the Kaiser arbitration clause impacted both Kaiser and its insureds equally.  “It does not detract from Kaiser's duty to use reasonable care in treating patients, nor limit its liability for breach of this duty, but merely substitutes one forum for another.  [Citation.]”  (17 Cal.3d at p. 711, 131 Cal.Rptr. 882, 552 P.2d 1178.)

As we have seen, where the plaintiff brings a cause of action under the Act and seeks injunctive relief, compelling arbitration would deprive the plaintiff of that remedy because an arbitrator is without the power to grant injunctive relief.  Madden therefore is not controlling.   The Legislature's intent that a plaintiff cannot waive the right to injunctive relief is clear.

We conclude that the trial court was correct in severing the two causes of action and in denying Cigna's motion to compel arbitration of the second cause of action for violation of the Act. In light of that decision, we need not, and do not, address the other challenges to the trial court's order.

DISPOSITION

The order of the trial court is affirmed.   Respondents are to have their costs on appeal.

FOOTNOTES

1.   Additional defendants were named, but they are not parties to this appeal.

2.   All further statutory references are to the Civil Code unless otherwise indicated.

3.   Section 1780 provides in pertinent part:  “(a) Any consumer who suffers any damage as a result of the use or employment by any person of a method, act, or practice declared to be unlawful by Section 1770 may bring an action against such person to recover or obtain any of the following:  [¶] (1) Actual damages, ․ [¶] (2) An order enjoining such methods, acts, or practices.  [¶] (3)․  [¶] (4) Punitive damages.”

EPSTEIN, Associate Justice.

CHARLES S. VOGEL, P.J., and HASTINGS, J., concur.

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