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OPINION and AWARD

IN ARBITRATION PROCEEDINGS
BEFORE ARBITRATOR RICHARD L. AHEARN
PURSUANT TO THE CODE OF CONDUCT AGREEMENT BETWEEN
CALIFORNIA HOSPITAL ASSOCIATION AND
SEIU-UNITED HEALTHCARE WORKERS WEST

CALIFORNIA HOSPITAL ASSOCIATION,


Complainant,

SERVICE EMPLOYEES INTERNATIONAL UNION,


UNITED HEALTHCARE WORKERS WEST
Respondent.

Appearances:
For Complainant:
F. Curt Kirschner, Jr.
Matthew J. Silveira
Kelsey Israel-Trummel
JONES DAY
555 Califomia Street, 26th Floor
San Francisco, CA 94104
For Respondent:
Eduardo G. Roy
John R. Hurley
Prometheus Partners L.L.P.
220 Montgomery Street, Suite 1094
San Francisco, CA 94104

I. PROCEDURAL BACKGROUND
This case involves a contract termed the Code of Conduct (the Code) that the
California Hospital Association (CHA) and Service Employees international
Union-United Healthcare West (UHW or Union) entered on May 5, 2014. CHA is
a trade association whose membership includes many of the public, for-profit and
nonprofit hospitals in the state of California. UHW represents healthcare
employees in numerous locations throughout California. On August 13, 2014,
CHA and UHW mutually selected me as the arbitrator to resolve any disputes
that might arise under the Code. The Code incorporated lofty goals as well as
various

obligations

and

restrictions

on

certain conduct

by each

Party.

Unfortunately, the promise of the agreement was not fulfilled and the Code
expired by its terms on December 3 1 , 2015.
On November 30, 2015, CHA filed this complaint against UHW, alleging that
UHW s sponsorship of the "Hospital Executive Compensation Act of 2016" (the
Initiative), violates subsections l.(B), II.(C) and other provisions of the Code.
CHA further asserted that it would seek "all appropriate remedies, in addition to
an order requiring the withdrawal of the Initiative." On December 16, 2015, CHA
amended its complaint to include UHW's establishment of a political fund in
support of the Initiative as an independent violation of the Code.

The arbitration hearing conceming this complaint, at which each Party had full
opportunity to present evidence and argument, was held over the course of
seven days in Oakland, California during the months of April and May 2016.^
With the filing of the Parties' well-written and comprehensive post-hearing briefs

^ In addifion to numerous documents entered into evidence, the follovving individuals testified on
behalf of CHA: Gail Blanchard-Saiger (Blanchard-Saiger), Vice President, Labor and
Employment, CHA, Duane Dauner (Dauner), President and CEO, CHA; Anne McLeod (McLeod),
Senior Vice President, Health Policy and Innovation, CHA; Jan Emerson-Shea (Emerson-Shea),
Vice President. External Affairs, CHA; Mitch Zak (Zak), Partner and Co-Founder, Randle
Communications; Greg Adartis (Adams), National Vice President, Kaiser Permanenfe; and Mark
Laret (Laret), CEO, University of California San Francisco Health. Dave Kieffer (Kieffer), Director,
of Government Relations, SEIU-UHW, testified on behalf of the Union.

on May 20, 2016 and a reply letter from CHA and a reply brief from UHW on May
26, 2016, the record closed.

II. THE ISSUES

The Parties expressed only minor disagreement about the statement of the
issues before me. On the basis of their respective positions, I set forth the issues
as follows:
"Did UHW breach the Code through its pursuit, sponsorship and/or
support of the Hospital Executive Compensation Act of 2016?"
"If so, what is the appropriate remedy?"

III. FACTUAL BACKGROUND

The Parties are not strangers to each other, having been engaged on a number
of occasions for the last several years. In particular, several times in the recent
past UHW threatened and/or submitted various ballot initiatives concerning the
hospital industry. In particular, in 2011 UHW filed with the Attomey General of
California two initiatives, one of which would have "put more prescriptive rules
around charity care to be provided by nonprofit hospitals" and the other that was
designed to "limit hospital prices."

In reaction to these initiatives, on May 2,

2012, CHA and UHW reached an agreement (Partnership for a Healthy


California) by which CHA agreed to try to facilitate meetings with hospitals
through which UHW would attempt to obtain organizing agreements.

In

exchange, UHW agreed that it would not take certain actions necessary to qualify
the above initiatives for the 2012 ballot in Califomia.

As a result, no such

initiatives appeared on the 2012 ballot.

With little progress obtaining the organizing agreements it expected would result
from the 2012 agreement, in eariy 2013 UHW threatened CHA with the possible
filing of other initiatives, absent tangible progress. Subsequently, in November

2013, UHW filed two more initiatives, one again concerning hospital pricing and
the other the Charitable Hospital Executive Compensation Act of 2014.

The

latter would limit compensation for executives of certain hospitals in the state of
Califomia.

Although UHW took responsibility for these 2013 initiatives, the two

proponents were individuals who were members of the Union's executive


leadership staff. These initiatives caused the Parties to engage in further
discussions that ultimately resulted in the Code.

According to testimony at hearing, a primary motivation for CHA to reach the


Code was insulation from the two 2013 initiatives as well as future protection for
the November 2016 ballot. The Parties also agreed to work together to seek a
solution to the chronic underfunding of Medi-Cal. For its part, UHW received a
new vehicle to potentially increase its membership through conditional access
agreements.

However,

the

opportunities

to

increase

membership

were

dependent both upon reaching agreement with hospitals on access agreements


for a sufficient number of employees and achieving full Medi-Cal funding by the
end of 2016. Upon execution of the Code, the Union ceased pursuing its 2013
initiatives and agreed not to file initiatives adverse to CHA during the term of the
Code.

IV. THE CODE OF CONDUCT


Purpose and Structure of Agreement

A. Purpose. The purpose of this Code of Conduct ("Agreement") is to express


the shared strategic vision and joint advocacy program of the Parties, as
opposed to simply reducing to writing a traditional codification of lowest-commondenominator labor relations practices. Thus, this Agreement is at its core an
articulation of the Parties' commitment to improving quality care; to reducing the
cost of healthcare; to reforming the financial framework to serve higher quality
and lower costs; to making hospital workers the healthiest in California; to
making hospital jobs the most desirable in California; and to making California
the healthiest state in the country. This Agreement not only embodies these joint
commitments, but is premised on the principle that through joint advocacy at the

local, state and federal levels for the "common good, we can remake the health
care system into what is needed at this moment for patients, healthcare workers
and healthcare employers."
B. Parties. The parties to this agreement collectively include: the California
Hospital Association ("CHA"), the Service Employees International Union, United
Healthcare Wori<ers-West ("SEIU-UHW" or "the Union"), and hospitals or health
systems who are signatories to this Agreement (collectively referred to as
"Parties")
D. Conditions Precedent and Subsequent.
1. It is a condition precedent to the consummation and effectuation of this
Agreement and the mutual rights and responsibilities contained herein
among all signatories that CHA and SEIU UHW execute this Agreement
no later than May 5, 2014.
2. By January 1, 2016, various hospitals and health systems in California
must execute a conditional agreement providing access rights to the
Union at acute care hospitals in California for at least thirty thousand
(30,000) non-union, non-supervisory employees ("Conditional Access
Agreement"). The Conditional Access Agreement shall be in a form
agreeable to the Union and the signatories to the Conditional Access
Agreement. The Union shall have rights under the Conditional Access
Agreements only after the achievement of a legislative or political solution
that meets the previously agreed upon goal of obtaining full Medi-Cal
funding and payments to hospitals for services rendered to Medi-Cal
beneficiaries to the maximum amount allowed under federal law without
reliance on a hospital fee, tax or assessment program ("Medi-Cal reform")
by December 31, 2016, unless otherwise agreed to by the CHA and SEIUUHW as set forth below. Nothing in this Section (D)(2) or elsewhere in this
Agreement shall require any signatory hospital or health system to this
Agreement to execute a Conditional Access Agreement. In the event that,
by January 1, 2016, an insufficient number of hospitals or health systems
execute Conditional Access Agreements to meet the requirement of thirty
thousand (30,000) non-union, non-supervisory employees specified above
in this Section (D)(2), the Union shall be released from all further
obligations under this Agreement, and this Agreement shall terminate.
3. This Agreement is contingent upon SEIU UHW not pursuing its pending
Fair Healthcare Pricing Act of 2014 and Charitable Hospital Executive
Compensation Act.
4. This Agreement, including any and all of its terms and obligations, shall
not be effective unless and until this Agreement is executed by both CHA
and SEIU-UHW. If SEIU-UHW and CHA jointly agree to terminate this
Agreement or SEIU-UHW terminates the agreement as set forth above,
then all of its terms are terminated with respect to all signatories.
5. In recognition of SEIU-UHW's commitment that Medi-Cal reform, as
agreed to by CHA and SEIU-UHW, will be achieved by December 3 1 ,

2016, CHA and SEIU-UHW shall, through multiple strategies, pursue that
goal and periodically evaluate progress towartds the goal, and may, by
mutual consent, adjust the goal, strategies and tactics.
I. A Code of Conduct for a Healthy Relationship
A. Principles
It is in all Califomians' best interest for employees and employers to
create and maintain a trust-based, stable relationship...
The following principles, which apply to SEIU-UHW and signatory
hospital(s) and health systems and CHA, are aimed at creating an
atmosphere based on mutual respect, truthful communications, and
freedom from coercion. The principles apply to the Union, signatory
hospitals and health systems, their subordinates in California and their
representatives and are not meant to constrain the rights of individual
employees but to enhance the collaborative relationship between the
Union and signatory California hospitals.
B. Mutual Respect and Collaborative Problem-Solving
1. During the term of this Agreement, the Parties shall establish and
maintain their relationship in a manner that is built ori honesty, mutual
respect, taist and joint commitment to problem-solving.
All
communications by the Union about CHA or a signatory hospital or
health system and all communications by CHA or a signatory hospital
or health system about the Union shall be factual and shall focus on
the merits of particular policies or issues. Differences, if any, shall be
addressed in a positive manner. No Party shall engage in personal
attacks or make derogatory comments about the other Party or its
leadership, including board members. The Parties will not utilize
surrogates to engage in any activity not permitted to the Party itself
under this Agreement. Nothing herein restricts any Party in
responding to statements or actions initiated by non-parties, including
non-party entities that are related to, but are not subordinate to, the
Parties to this Agreement. The Union shall not carry out or engage in
any "Anti-Employer Activities" as defined herein. Neither the CHA nor
signatory hospitals or health systems shall carry out or engage in any
"Anti-Union Activities" as defined herein...
Subsection I.B.2 (Defining Anti-Employer Activities)
"Anti-Employer Activities" mean the following activities directed at or with
respect to CHA or signatory hospitals or health systems and any of their
officers, directors, managers or shareholders:
actions commonly
associated with a corporate campaign; reputation or economic attacks;

personal attacks; or instigating or supporting any of the following: litigation


(with the exception of litigation to enforce the terms of an existing
collective bargaining agreement); adverse action by any branch of
government; or adverse actions by other third parties.
Subsection I.B.4
It shall not be deemed an Anti-Employer Activity to do any of the following:
a. Communicate with the govemment and members of the public
(including employees of signatory hospitals or health systems)
about policy issues that affect a significant portion of the healthcare
industry, even if the parties differ over such issues, as long as such
communication does not identify the signatory or degrade, attack or
make accusations with respect to a signatory or the hospital
industry as a whole. Examples of communications that degrade or
attack a signatory hospital or health system or the hospital industry
as a whole include communications raising concems about hospital
pricing and executive compensation in healthcare. This does not
apply to non-signatories;...
The Code also provides for the creation of a labor-management cooperation
committee (LMC) and establishes its agenda:
II. Joint Advocacy and Shared Responsibilities
A. Joint Advocacy Fund
The Union and all signatory hospitals and health systems agree to
establish an industry-wide Labor Management Cooperation Committee (the
"Committee"), as permitted by the Labor Management Cooperation Act of 1978
("LMCA"), for the purposes of jointly advocating for improved communication
between representatives of labor and management; providing healthcare workers
and employers with opportunities to study and explore new and innovative joint
approaches to achieving organizational effectiveness; assisting healthcare
workers and employers in solving problems of mutual concern not susceptible to
resolution through traditional collective bargaining process; studying and
exploring ways of eliminating potential problems which reduce the
competitiveness and inhibit the economic development of the healthcare industry
in California; enhancing the involvement of healthcare workers in making
decisions that affect their working lives; expanding and improving working
relationships between healthcare workers and managers; and any other
permissible purposes under the LMCA.
2. As provided in the LMCA, in the first two years of this Agreement, the
Committee shall focus on the following agenda: Medi-Cal reform and funding for
hospital services as specified and formalized by CHA and the Union, conducted

through educational, legislative, regulatory and initiative strategies. The


Committee may also address other mutually agreed upon issues as permitted by
the LMCA.^
The Parties also agreed to the following:
B. The Parties also agree to jointly and publicly support the following initiatives
and principles: "Let's Get Healthy California; the principle that Team Care is
Great Care; the principle that compensation should include consideration of a
pay for performance model based upon improvements in quality care and the
financial strength of hospitals and health systems; the goal of promoting a
healthy workplace through wellness programs; workforce development; and
removing administrative, legal and regulatory impediments to caregivers being
able to work at the top of their scope of practice, and allowing hospitals to staff to
the needs of their patients.
The Parties also incorporated the following restrictions:
C. The parties agree that during the term of this Agreement, the Parties shall not
pursue, sponsor or support any legislation, initiative, regulatory, or other efforts
that are adverse to the interests of the other Party, or their sponsors or affiliates.
Notwithstanding this section, a Party may take whatever action is necessary and
appropriate to respond to the activities of third parties, except that this shall not
authorize the Union to sponsor or support legislations, initiatives, or regulatory
actions adverse to the California hospital industry during the terms of this
Agreement. Nothing herein prohibits the parties to this Agreement from engaging
in the above activities with respect solely to non-signatories to this Agreement.
In addition. Section III of the Code, titled Meaningful Enforcement of the
Agreement, provides in subsection B:
The Parties shall designate an Arbitrator and an Alternate Arbitrator by
June 1, 2014, or by another mutually agreeable date. The designated Arbitrator
shall resolve any disputes over the application and interpretation of this
Agreement. The Arbitrator shall have final and binding authority to enforce this
Agreement and resolve issues that rise during the course of this Agreement. The
Arbitrator shall also have the authority to establish procedures and timelines for
addressing issues and alleged violations.

^ On September 17, 2014, the LMC was incorporated, with bylaws that required an equal
number of members from CHA and UHW on the Board of Directors, with co-chairs
Dauner and Dave Regan (Regan), President of UHW. The bylaws provided that the LMC
required approval of both Dauner and Regan to expend any funds.

V. THE EVIDENCE

Following execution of the Code, efforts in support of the Union's goal of


conditional

access

agreements

covering

30,000

employees

in

California

hospitals and in support of increasing Medi-Cal funding occupied much of the


time and energy of the Parties.

The Conditional Access Agreements


On numerous occasions CHA communicated with its member hospitals to assess
their willingness to sign a form of conditional access with the Union. However,
the overtures received a generally tepid reception.

At some point during the

summer of 2015, Dauner informed Regan that he did not believe that enough
hospitals would agree to the conditional access for the Union to reach the
contractual threshold of 30,000 non-union, non-supervisory employees by the
end of 2015. Regan reacted by expressing that he "expected that."

Subsequently, the Union proposed various alternatives that it hoped would serve
a similar purpose as the conditional access agreements in the Code:

A proposed amendment of the Code that would establish the number of


employees to be organized as a proportion of the funds generated for
Medi-Cal

Creation of a unionized healthcare worker co-op

A joint advocacy or education campaign to be carried out during Medi-Cal


funding activities.

CHA reacted to these various proposals by suggesting modifications, presenting


the options to the hospitals for further consideration and arranging meetings
between the hospitals and the Union to discuss opportunities. However, by
September 27, 2015, the nonunion hospitals unanimously rejected the Union's
proposals. Upon being informed of this result, Regan did not express surprise.
Thus, by late September 2015, despite numerous efforts to satisfy the condition

precedent that was critical to the Union, it was apparent to all Parties that the
December 31, 2015 deadline of achieving sufficient access rights for UHW would
not be met and that the Code would thereby expire by its terms.

The 2016 Executive Compensation Initiative


Disappointed with the lack of progress on achieving the conditional access
agreements described in the Code, beginning in April 2015, Regan informed
CHA the Union would "re-file ballot initiatives by September" if there was no
progress on the organizing agreements with the hospitals.

Subsequently, in

support of sponsoring an initiative, the Union pursued the following:

By June 30, 2015, UHW's chief of staff Greg Pullman initiated internal
discussion of the Union's resources to file an executive compensation
initiative.

On July 13, 2015, Regan directed various officers of UHW to begin


pursuing an executive compensation initiative.

Subsequently, UHW sent a draft initiative to a third party to conduct polling


research.

Late August, UHW provided the initiative with its title and signed a contract
with a strategy group.

Roughly simultaneous with the above activity, on numerous occasions Regan


reminded CHA that UHW would file ballot initiatives in the fall, absent progress
on organizing agreements. In particular, in a July 27 email and at the July 28
LMC meeting, Regan alerted CHA that if they didn't get the signatures for the
30,000 positions, the Union would file an initiative on executive compensation
around eariy September. At the same time, Regan indicated that the initiative
would be withdrawn if the 30,000 signatures were submitted.

During other

conversations and meetings in August, including the August 14, 2015 Labor
Management

Committee (LMC) Board

meeting, Regan

reiterated

similar

intentions, noting there was little time to find a path to help UHW organize new
members.

Although UHW did not file the initiative in September, at the

September 28 LMC meeting Regan again expressed UHW's intention to file an


executive compensation initiative.

Throughout September and October the Union continued to engage in a number


of discussions and meetings about the most effective strategy for the initiative,
eventually completing the necessary language on November 17, 2015.

On

November 19, 2015, UHW Communications Director Nathan Selzer (Selzer) and
Executive Board member Ben Tracey (Tracey) received copies of the executive
compensation ballot initiative (The Hospital Executive Compensation Act of
2016) for the first time.

The following day, Selzer and Tracey, as the two

proponents, filed the request for circulating title and summary with the Attomey
General of California."'

At a December 11, 2015 UHW executive board meeting, in response to


questions about the Initiative, Regan explained:

The executive board will have authority to decide if there is reason to


withdraw the executive compensation ballot initiative, and

The deadline for whether to move forward is June 30, 2016.

On December 12, 2015, the Union's executive board voted to provide $3 million
in a campaign account for the Initiative. A UHW press release on December 16,
2015 announced the creation of Califomians for Hospital Accountability and
Quality Care to support the ballot measure. On March 16, 2016 a press release
announced the Union's intention to submit sufficient signatures to qualify for the
November 2016 ballot.'*

Medi-Cal Funding
With the Code lacking any particular strategy for increasing Medi-Cal funding, on
September 17, 2014, the Labor Management Committee (LMC), consisting of an

^ There is no record evidence that Selzer or Tracey had any involvement with the Initiative before
this date.
" Following the close of the hearing, counsel for UHW notified me that sufficient signatures had
been submitted to qualify the Initiative for the November 2016 ballot.

10

equal number of members from each Party, was created pursuant to the Labor
Management Cooperation Act (LMCA). The LMC's goals included joint advocacy
for various improvements in the healthcare industry, with a focus on obtaining
increased funding for Medi-Cal.^ The terms of the LMC required authorization of
both the CEO of CHA (Dauner) and the President of the Union (Regan) in order
to expend monies.

Initially, the LMC discussed numerous potential strategies to achieve the funding
goal, brainstorming options for consideration, including the use of an outside
consulting group. The diverse proposals ranged from a new state tobacco tax to
a special legislative session. None of the various proposals was finalized; rather,
each remained under active consideration. The April 7, 2015 strategy plan
included the additional option of raising revenue through a ballot initiative,
estimating that a winnable initiative could raise over $1 billion. By June 30, 2015,
the LMC decided to have its executive director Peter Ragone (Ragone) begin to
work on a strategy for a "Proposition 30" extension, with revenue directed
towards healthcare.^

The SEIU-UHW Proposal


About one week after the LMC had voted to pursue a possible Proposition 30
option, the Union produced a Proposition 30 initiative that the Union had been
working on "confidentially" for over 2 months. There is no evidence that CHA had
been aware of UHW's activities with respect to its preparation of the initiative.
The Union estimated that the initiative could provide up to $2.5 billion in
additional Medi-Cal funding, with about

$1.6 billion for the hospitals.

UHW

asked the LMC to agree to file the initiative within a week. CHA representatives
expressed surprise and raised a number of concerns about the Union's proposal.
^ The Parties were careful to follow the guidelines for labor management committees; when
meeting as the LMC, they adjourned those meetings before meeting separately to discuss issues
such as organizing agreements.
^ Proposition 30 was an initiative passed in 2012 with support largely from the California
Teachers Association (CTA) and the governor, with proceeds generally marked for education and
none for healthcare. It will expire in 2018. By the summer of 2015, CTA and a number of other
stakeholders were openly working on a proposal to extend Proposition 30.

11

including the likelihood that the California Teachers Association (CTA), the socalled "ABC Coalition" and the Governor would be angry and unhappy if the LMC
were to file a competing statewide tax increase initiative.

In particular, CHA

expressed concern that competing Proposition 30 initiatives would undermine


each other, decreasing the opportunity of either passing.

While recognizing that a single ballot initiative would be the best approach,
members of the LMC held "robust discussions" on the most effective path
forward while never reaching a firm consensus.^

Although the Parties never

reached a decisive agreement on a final plan, there was general agreement that
it would be best to avoid having two initiatives seeking statewide tax increases
going forward.

A considerable impediment to full involvement of the LMC with the stakeholders


in the ABC coalition was UHW's apparently strained relationship with the
governor and the SEIU State Council.^

Eventually, SCN, a consulting firm

retained by the LMC, proposed 4 options, including having Dauner, Ragone and
Darrell Steinberg (Steinberg) engage in negotiations concerning ballot initiatives
with the Governor's office, CTA and other stakeholders. Without endorsing any
particular final option, the LMC voted in favor of the following steps:

Filing its own Proposition 30 initiative

Amending the initiative

Creating and funding a support committee with a $9 million loan and a $1


million contribution.

With competing Proposition 30 initiatives submitted to the Attomey General's


office, the LMC asked Ragone and Steinberg to contact the various labor side
stakeholders, and asked Dauner to reach out to the Governor's office.

Although

the Union objected to certain of Dauner's efforts, Kieffer conceded that CHA's
^ Separate and apart from the LMC meetings, the Parties also continued to brainstorm efforts to
help UHW obtain access and organizing agreements as contemplated in the Code.
^ Although SEIU-UHW is a member of the State Council, each is a disfinct entity.

12

reports to the LMC alerted UHW that Dauner was also reaching out to
representatives of labor.
included

Despite efforts by CHA to have UHW and the LMC

in the discussions,

both the

Governor's

office and the

other

stakeholders, including CTA and the SEIU State Council, continued to insist that
they would not meet with UHW or the LMC, but only with CHA separately.

A Compromise Initiative
In late October 2015, CHA and its directors on the LMC understood that UHW
continued to insist that it be involved in any initiative, including a single initiative
involving CTA and the other stakeholders. On the other hand, it was likewise
clear that the other stakeholders would not modify their position of opposition to
UHW's involvement.

At an October 20 meeting of CHA's Board of Trustees,

Dauner's presentation titled "At The Crossroads" addressed these concerns and
outlined various options for increasing revenues to hospitals in California,
including but not limited to both the LMC and ABC Proposition 30 initiatives. In
particular, with respect to the ABC option, two "cons" listed were the Code and
adverse UHW initiatives. Regarding the LMC initiative, the "cons" included
competition and relationships. According to witnesses for CHA, conceding that
they could not satisfy everyone, the Trustees concluded that they should focus
on the strategy that would create the best chance for increased Medi-Cal
funding. They voted in favor of the ABC coalition.

By late October, CHA and the ABC coalition were negotiating tentative "deal
points" on a potential single ballot initiative. As the tentative deal points included
numerous conditions and were far from final, the LMC simultaneously continued
to move forward to "protect" its position with the ABC coalition and to help
guarantee that the hospitals would be fairiy represented in the ABC Proposition
30 extension.

Various internal observations in October 2015 by CHA's representatives reflect


the somewhat tense dynamics as the deadline for choosing a path forward

13

approached

and

as

UHW

continued

to threaten

to file the

executive

compensation initiative. For instance, Laret wondered whether they should end
the relationship with UHW and Adams wondered whether joining the other
coalition's ballot initiative would violate the LMC agreement. On October 2 1 ,
2015, Laret also opined that it wasn't good faith to be engaged in separate
negotiations with third parties while in the LMC with UHW.

Shortly thereafter, the governor's office called for a meeting with CHA directors
on the LMC to discuss the governor's position that the governor would oppose
the LMC initiative and that he would likely support the ABC coalition's Proposition
30 extension ballot measure.

Aware of the meeting in advance, Regan

expressed his concern that it was designed to get CHA to join a bad deal.
Nevertheless, on November 3, 2015, Dauner attended the meeting at which the
governor's office expressed the position described above.

Given the position of the govemor, and consistent with the widely held view that
a single initiative had the greatest chance of success, CHA and its directors
determined that the best way to obtain additional funding for Medi-Cal was to
participate in the ABC coalition. Although knowing that UHW opposed any such
alliance that excluded the Union, CHA reached an agreement to join the ABC
coalition

that

would

presumably

provide

additional

Medi-Cal

funding.

Significantly, the agreement precluded CHA from supporting any other Prop 30
extension initiative, including that of the LMC. According to witnesses for CHA,
the ABC coalition's initiative would serve the LMC's goal of increasing Medi-Cal
funding; moreover, the LMC could still subsequently offer its support.

Upon learning of the deal between CHA and the ABC coalition, Regan indicated
that he was not surprised and focused on the Union's partnership with CHA and
the LMC going fonward. According to Kieffer, UHW objected to CHA's conduct
but CHA said it didn't care.

14

Almost immediately, Regan sent a letter to a number of California hospital


executives, complaining that CHA had "folded" by agreeing to a compromise that
would provide much less funding than if it had pursued the initial LMC initiative.

On November 4, 2015, CHA issued a press release stating:


"CHA, the California Medical Association, Califomia Teachers Association
and SEIU Califomia State Council have reached an agreement to sponsor a new
ballot measure that would extend the temporary income tax provisions of prop 30
from January 1, 2019 through December 31, 2030.

CHA will not provide support for any other proposition 30 extension
initiative."

On November 17, 2015, Dauner informed Diana Dooley, Secretary, California


Health and Human Services, that CHA had advised UHW that it would not
support the LMC initiative and that CHA was "working (difficult task) to wind down
the LMC and terminate the May 5, 2014 agreements."

On November 19, 2015,

during a phone conversation, Regan accused CHA of reneging on its contractual


obligations. However, Regan also explained to Dauner that the Union was still
committed, that he wanted to keep the Code in place, and asked CHA to
continue to support the LMC initiative.

On November 20, 2015, the Union's

media spokesman expressed that the partnership agreement (the Code) and the
labor management agreement remained in place.

VI. Parties' Arguments Briefly Summarized

CHA
CHA contends that the Union's actions with respect to the 2016 Executive
Compensation Initiative breached Section II.C of .the Code that prevents the
Parties from engaging in activities adverse to the interests of the other Party.
Further, the Parties agreed that they would not use surrogates to engage in

15

otherwise prohibited activities. As the evidence demonstrates that the Union


either directly or through its surrogates pursued, sponsored or supported the
2016 Executive Compensation Initiative and that the Initiative is adverse to the
interests of CHA, both elements of a violation are established.

Further, CHA fulfilled its obligations under the Code and there is no evidence that
CHA repudiated or breached the Code. Initially, the failure to obtain conditional
access agreements with the hospitals could not constitute repudiation by CHA as
it had no obligation to enter any such agreements.^

In addition, UHW's

allegations about CHA's alleged misconduct do not constitute violations of any


obligations established by the Code. Moreover, as the new ABC coalition
initiative is not adverse to the Union's interests, CHA did not breach its
obligations by agreeing to join the ABC coalition.

Finally, an injunction extending to Selzer and Tracey and requiring the withdrawal
of the Initiative is rationally related to UHW's breach and is necessary.
Moreover, UHW's objections to an injunction fail.

UHW
In order to prevail, CHA has to demonstrate its own performance. The Code
imposes a mutual duty to work towards Medi-Cal reform and to form the LMC to
advance that goal and others. By entering the relationship with the ABC coalition
that excluded UHW, by expressing its intent to "unwind" and "terminate" the
relationship and by preventing the LMC from taking any action to further the
goals of the Code, CHA announced that it was not going to perform its
obligations under the Code. It thereby repudiated the entire relationship and thus
cannot assert a claim for breach against UHW.

Further, the injunctive relief that CHA seeks may not be granted because there

^ As the Union is no longer alleging that failure lo obtain the expressed conditional access
agreements demonstrates repudiation, I will not discuss this further.

16

could be no actual harm to CHA and any harm would not be a necessary
consequence of the alleged breach.
basis to seek an injunction.

With no identifiable injury, CHA has no

The doctrine of unclean hands, first amendment

considerations, the public interest and a balancing of equities each likewise


preclude issuance of an injunction. Moreover, as the individual proponents of the
Executive Compensation Initiative are not parties to the Code, their rights cannot
be adjudicated in this arbitration.

VII. ANALYSIS
My obligation as the Arbitrator is to determine the mutual intent of the Parties as
expressed in the Code. In that regard I note that the Code contains no limiting
language on the scope of the Arbitrator's authority to resolve disputes under the
Code and to enforce the Agreement.

I further agree with UHW that the elements of a cause of action for breach of
contract include the following that are discussed below:
1. The existence of a contract;
2. Plaintiffs performance or excuse for nonperformance;
3. Defendant's breach; and
4. Damages to plaintiffs therefrom.^"

A. A Contract
Based on the Parties' stipulation, the existence of a contract is not in dispute.
Thus, I find that the Code is a contract that was in existence at all times material
herein.

B. Plaintiff CHA's Performance


UHW Contentions
In support of its contention that CHA failed to establish a cause of action because

^ Judicial Council of California Civil Jury Instructions (CACI) no.303.


17

it failed to perform its obligations, UHW asserts that the Code's covenants
restricting various actions by either Party are subservient to the fundamental
purpose of the agreement: a strategic, cooperative partnership for collaborative
problem-solving. Both generally and more specifically, CHA's actions allegedly
violated its obligations tb cooperate with the Union as reflected in section D.5 that
imposes a mutual duty to work towards Medi-Cal reform by the following:
In recognition of SEIU-UHW's commitment that Medi-Cal Reform, as
agreed to by CHA and SEIU-UHW, will be achieved by December 31, 2016, CHA
and SEIU-UHW shall, through multiple strategies, pursue that goal and
periodically evaluate progress towards the goal, and may, by mutual consent,
adjust the goal, strategies and tactics.
In addition, CHA's actions arguably violated section II.A.2 that explains that the
LMC:
... shall focus on the following agenda: Medi-Cal reform and funding for
hospital services as specified and formalized by CHA and the Union, conducted
through educational, legislative, regulatory and initiative strategies. The
Committee may also address other mutually agreed upon issues as permitted by
the LMCA. (emphasis supplied)
As CHA repudiated the Code, any actions by the Union in connection with the
Executive Compensation Initiative could not constitute breaches ofthe Code.

UHW further argues that CHA entered secret associations with third parties and
prevented the ballot measure developed in the LMC from being filed. Thus, by
entering into an agreenient with the ABC coalition on November 3, 2015, CHA
effectively abandoned jts relationship with UHW under the Code and thereby
repudiated its obligations set forth above in the Code.

The ABC agreement,

signed by CHA, the California Medical Association (CMA), CTA and the SEIU
Council, expressed a commitment to qualify and pass a statewide initiative to
extend the personal income taxes currently imposed by Proposition 30 and to
distribute a portion of the revenues raised, subject to various conditions, to MediCal funding. Significantly, the new agreement required the signatories to agree
not to support any competing measure (such as the LMC initiative) related to an

18

income tax increase. According to UHW, by agreeing not to cooperate on the


LMC Initiative, CHA expressed an unequivocal intent to repudiate its obligations
to perform under the Code.

Additional evidence on which UHW relies includes a telephone conversation on


November 3, 2015, in which Dauner explained to representatives of UHW that
the new coalition was not willing to work with UHW and that they, therefore, could
not be part of the coalition.

The following day, a press release from CHA

confimned its membership in the new coalition and that it had agreed that it would
not provide support to any other Proposition 30 extension initiative. According to
UHW, these actions demonstrated that CHA was abandoning the many months
of work by the joint LMC.

Moreover, CHA was effectively announcing that it

would not carry out its duty to work cooperatively with UHW to achieve the goals
of the Code. In addition, following November 3, CHA prevented the LMC from
pursuing a legislative strategy to obtain more funds for Medi-Cal.

Further confirmation of CHA's alleged repudiation is reflected in Dauner's


November 17, 2015 email to California Secretary of Health and Human Services
Director Diana Dooley in which he explained that CHA was working on the
difficult task of winding down the LMC and terminating the Code.
In addition, in a subsequent telephone conversation on November 19, 1995,
Dauner failed to refute Regan's assertion that CNA had reneged on its
obligations under the Code.

Further, CHA directors Adams and Laret admitted

in various communications that CHA's actions violated the LMC agreement and
their obligations to act in good faith. The Union also contends that any doubt
about CHA's intentions is resolved by Dauner's confirmation that at CHA Board
meetings in October 2015, the Board discussed "next steps to unwind the LMC
or find a path ~ a different path to go away from the LMC and the Code of
Conduct."

19

According to UHW, the above communications and actions demonstrate that


CHA understood and intended to terminate the relationship established by the
Code. Thus, by communicating an unequivocal intent to not perform under the
Code, CHA violated the basic duty to work cooperatively with the Union in
support of the Parties' expressed goals. Accordingly, CHA repudiated the entire
relationship with UHW.

Express Conditions in the Code


The Union is correct that by entering the ABC coalition agreement, CHA
precluded the possibility of proceeding further on the LMC initiative. However, as
explained below, I am not persuaded that CHA's actions constituted a
repudiation of the Code, thereby excusing UHW from any restrictions in the
Code.

As a preliminary matter, 1 agree with UHW that CHA

"must prove it has

performed all conditions on its part or that it was excused from performance.
Similarly, where defendant's duty to perform under the contract is conditioned on
the happening of some event, the plaintiff must prove the event transpired."
Consolidated World Investments, Inc., v. Lido Preferred Ltd., 9 Cal. App. 4th 373,
380 (1992).

In that case the transaction involved plaintiffs agreement to

purchase a building from defendant.

A condition precedent to defendant's

obligation to sell was the closing of escrow within an agreed-upon time frame.
The defendant could not perform its promise until after plaintiff performed its part.
Plaintiffs failure to establish that it opened an escrow within the specified time
limits precluded its claim that defendant breached any duty to sell the property.

As in Consolidated, the Code sets forth certain express conditions. They include
the following conditions precedent in Section D under Purpose and Structure of
Agreement:

That CHA and UHW execute the agreement no later than May 5, 2014.

20

That UHW not pursue its pending Fair Healthcare Pricing Act of 2014 and
Charitable Hospital Executive Compensation Act.

Both conditions precedent were satisfied and present no issues here.

Section D also included certain conditions subsequent, including:

A condition subsequent that by January 1, 2016 various hospitals and


health systems must execute a conditional access agreement providing
access rights to the Union at acute care hospitals in Califomia for at least
30,000 employees.

A condition subsequent that the Union shall have rights undel' the
conditional access agreements only after the goal of obtaining full MediCal funding and payments to hospitals is met by December 31, 2016,
unless otherwise agreed by the Parties.

Both Parties agree that the first condition subsequent was not met and that as a
result the Code expired by its terms January 1, 2016. Cleariy, as the second
condition subsequent was dependent upon the first, it had no practical effect.

With the above conditions not in issue, UHW relies on certain specific
obligations, as well as the overarching purpose of the Code, to contend that
CHA's actions constituted a repudiation of the entire relationship. Set forth below
is my evaluation of the Parties' arguments on the merits.

Secret Negotiations and Internal Deliberations


With respect to the allegation that CHA engaged in secret negotiations and
prevented the LMC initiative from being filed, I find that the evidence reveals
instead that UHW was generally aware of the purpose and general substance of
Dauner's outside meetings, as he had been directed by the consultant to the
LMC to engage in negotiations with the Governor's office and other stakeholders,
even if not the other labor organizations.

Moreover, although UHW was

extremely displeased that the meetings were occurring, particulariy without their
involvement, abundant evidence reveals that despite CHA's many efforts to the

21

contrary, it was the stakeholders that insisted UHW was not welcome. Further,
UHW's own involvement in developing the original LMC Prop 30 initiative without
the knowledge of CHA demonstrates at a minimum that the Parties understood
that they were privileged to engage in activities unilaterally and outside the
frameworic of the LMC. In light of the foregoing, I am not persuaded that alleged
secret negotiations support repudiation of the Code.

Moreover, although various internal communications within CHA reflect an


appreciation of the delicate nature of balancing the relationship with UHW with
ongoing discussions with outside stakeholders, I am not persuaded that those
communications

provide

evidence

of

repudiation.

Thus, although

they

demonstrate genuine concern about ethics and CHA's contractual obligations,


they do not constitute improper conduct. Likewise, the October 20 vote by the
Trustees of CHA confirms that they evaluated the risks and negatives of entering
a relationship that would preclude proceeding with the LMC initiative. Although
issues discussed on these occasions included concerns about the impact on the
LMC and the relationship with UHW, I do not find that such discussions establish
repudiation of the relationship.

Rather, they reflect realistic speculation about

potential consequences, particulariy given the context of the numerous occasions


on which UHW had threatened filing an executive compensation initiative.

Stalling The LMC Initiative


With regard to the assertion that CHA stalled in filing the LMC initiative, there is
no evidence that the LMC ever agreed to proceed to undertake all steps to place
the initiative on the ballot. Rather, the LMC voted to take only certain steps to
proceed, while continuing to examine its options.

In that regard both Parties

recognized the value of a combined initiative that could involve all stakeholders.
By maintaining the option of filing its separate initiative, the LMC hoped to place
itself in the strongest possible negotiating position with the other stakeholders.

22

Moreover, there is no obligation in the Code that the Parties must agree on any
specific measure that would arguably support an increase in Medi-Cal funding.
Rather, the structure of the LMC, with equal membership from each Party, and
veto power residing in both Dauner and Regan, reflected an appreciation of the
sometimes competing interests of each Party.
activities of the LMC demonstrates

Indeed, the evidence from the

robust discussion and sharp, often

challenging disagreements about strategy and progress. In light of the foregoing,


I am unable to find that allegations about stalling the LMC initiative support a
finding of repudiation by CHA.

Joining the New Coalition


With respect to the specific allegation that CHA repudiated the Code by joining
the new coalition that did not allow UHW as a member, and that prohibited CHA
from supporting the LMC initiative, I likewise am not persuaded by UHW's
argument. In that regard I initially recognize that on October 5, 2015, the
consultants for the LMC proposed four scenarios that could lead to "a potential
win on Medi-Cal funding" in the context of a Proposition 30 extension.

The

options included:

Pass a compromise initiative with the ABC coalition

Convince the ABC coalition to join and pass the LMC initiative

Obtain the most votes in the November election for the LMC initiative

Leverage the filing of the initiative and/or withdrawal to obtain favorable


budget action

Although the LMC never reached a firm agreement on which strategy would be
fully pursued, a consensus between both CHA and UHW included a recognition
that competing initiatives frequently doom both to failure. On the other hand, a
prominent consideration of both Parties was a belief that continuing to move
fonward with the LMC initiative would at least preserve leverage in negotiating
with the ABC coalition and other stakeholders.

Various texts and emails

introduced at hearing demonstrate that in the fall of 2015, UHW was generally
aware that Dauner had been meeting with the Governor's office, CTA and other

23

stakeholders, and also that these particular stakeholders were unwilling to meet
with UHW or to allow UHW to join their coalition.

Taken as a whole, the evidence concerning the LMC reveals robust discussion
and frequent sharp disagreements about the most advantageous course(s) of
action. Significantly, the LMC provided a vehicle for an evolving process of
discussion, debate and analysis.

Ultimately, the LMC never adopted a firm

strategy or plan. Rather, the LMC continued to assess options as it attempted to


evaluate the likelihood of success of various strategies. Importantly, neither the
Code nor the LMC required either party to act only through their association
within the LMC.

Moreover, the ABC Coalition agreement supported the LMC's

goal of increased Medi-Cal funding. Moreover, it did not preclude the LMC or
UHW from providing support.

Under all these circumstances, although UHW

objected strenuously to certain of CHA's activities with the other coalition, I am


unable to find that entering the agreement violated any provision of the Code or
constituted a repudiation.

Section 11.C of the Code


I am also persuaded that by joining the new coalition CHA did not breach its
obligation to avoid activities "adverse" to UHW. Thus Section II.C of the Code
specifies:
"The parties shall not pursue, sponsor or support any legislation, initiative,
regulatory, or other efforts that are adverse to the interests of the other Party, or
their sponsors or affiliates.
In this regard, as discussed above, both the LMC initiative and the new coalition
initiative would seek funding for Medi-Cal, the central goal of the LMC.

In

addition, as eariy as the summer of 2015, it was apparent to all Parties that UHW
would be unable to obtain sufficient conditional access agreements from the
hospitals. In such circumstances, CHA's participation in the new coalition at the
expense of the LMC initiative would not undermine UHW's goal of increasing
organizing opportunities. To the contrary, CHA's numerous attempts to develop

24

alternative strategies for helping UHW achieve increased membership belies any
intent to thwart the Union's organizing goals. In light of the foregoing, I am
persuaded that CHA's participation in the new coalition was not "adverse" to
UHW's interests.

Precedent
I further find that the teaching of Mammott) Lakes Land Acquisition, LLC v. Town
of Mammoth Lakes, a case relied upon by the Union, does not compel a finding
that CHA repudiated.'^ In that case, after the town decided it no longer desired
the building project at the airport that was the subject of the development
agreement, it refused to move forward, actively undermining the developer's
rights under the contract. Here, unlike a singular transaction that was the sole
object of the agreement in h/lammoth, working exclusively with each other to
attempt to achieve Medi-Cal reform was not a condition of the Code. In light of
the foregoing, I am persuaded that entering the agreement with the ABC coalition
did not undermine UHW's rights under the Code.

Failure to Work Cooperatively


With respect to UHW's contention that CHA abandoned the fundamental purpose
of the Code, to work cooperatively with the Union in finding a solution for the
Medi-Cal funding issue, I am persuaded that the Code did not require the Parties
to act bilaterally or in accord on all matters. Thus, although I B is titiled "Mutual
Respect and Collaborative Problem-Solving," and although I.B.I expresses that
the Parties shall "establish and maintain their relationship in a manner that is built
on...joint commitment to problem solving...," the Code did not require unanimity
or restrict the Parties to working exclusively together.

Rather, they each

maintained a right to act unilaterally, as long as they did not violate any
provisions of the Code. In this regard the Code specifically recognizes that the
Parties may differ over policy issues and that expression of such differences to

'' Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes, 191 Cal. App. 4th 435
(2010).

25

the government and to the public are privileged as long as they do not degrade,
attack or make accusations with respect to the other P a r t y . T h e r e is no
evidence that CHA acted in a degrading or accusatory way towards UHW.

More specifically, I also do not read D.5 of the Code to restrict efforts to achieve
Medi-Cal reform to working only with each other. In that regard I do not agree
that the phrase "shall...pursue..." imposes a mandatory duty on the Parties as
contended by UHW. Rather, the intent of the Parties use of "shall' in this context
appears to express what the focus of the LMC "will" be, thus merely setting out a
description of their future activities.

In any event "shall" does not establish a

mandatory duty to avoid pursuing Medi-Cal reform by any other means.


Likewise, I find nothing in II.A.2 that mandates the LMC as the exclusive vehicle
for seeking reform of Medi-Cal.

In any event, the LMC never decided on a final course of action with respect to
its proposed initiative and nothirig in the new coalition's initiative would prevent
UHW

from

supporting

it.

Moreover,

all

evidence

dictates

that

CHA

representatives attempted, although unsuccessfully, for inclusion of UHW and


the LMC in tHe ABC coalition initiative. Further, I find no provision in the Code
that compels a Party to pursue a strategy preferred by the other Party, even if
both understand it likely to fail.

Only when it was clear that the other

stakeholders were firm in their opposition and that the mutual goal of increased
Medi-Cal funding could best be achieved through alliance with the ABC initiative
did CHA join. In light of all these circumstances I am unable to find any breach by
CHA.

I further find that CHA's actions did not constitute a repudiation of the entire
relationship. In this regard I consider it significant that by no later than September
2015, both Parties realized that the Union's goal of sufficient conditional access
agreements would not be achieved by the deadline in the Code and that the
Sections I.B 4(a) and 5(a).

26

Code would therefore expire by its terms by the end of the calendar year.
Nevertheless, the Parties continued to engage in efforts through the LMC to find
a solution to Medi-Cal funding. Significantly, I credit the testimony of the CHA
representatives that their action was taken in the good faith belief that it
represented the best opportunity for increased funding for Medi-Cal, the
fundamental purpose of the LMC.'"^

Further, as I previously discussed, I am

persuaded that "working cooperatively" represented a means to achieving the


basic purpose of the LMC, which was increasing Medi-Cal funding. Accordingly, I
am unable to agree with UHW that CHA's actions repudiated the Code, as
"working cooperatively" was not the overarching purpose of the LMC or the
Code. In light of the foregoing I am compelled to conclude that CHA did not
repudiate the Code by an alleged failure to work cooperatively with UHW.

Based on all the foregoing, 1 find that CHA fulfilled its performance obligations
under the Code.

C. The Union's Alleged Breach


As provided in Sections II. C and I.B.I, of the Code, the Parties are prohibited
from:

Pursuing, sponsoring or supporting any legislation, initiative...or other


efforts that are adverse to the interests of the other Party, or their
sponsors or affiliates, and

Using surrogates to engage in any activity not otherwise permitted in the


Code

As explained

below,

I find abundant

record evidence that

conclusively

demonstrates the adversity of the initiative to CHA. For instance. Section D.3
provides an express condition that UHW not pursue its 2014 executive
compensation initiative. I find that provision alone establishes the adversity of
such initiatives to CHA.

Moreover, the 2016 Executive Compensation Initiative

Kieffer also agreed that a single initiative has a better chance of success.
27

extends the reach of the 2014 Initiative to additional categories of hospitals.


Although not necessary to my conclusion, other evidence includes Section 1.B.4
that provides a "degrade or attack" prohibition. Further, as testimony at hearing
revealed that insulation from this type of initiative was a primary motivator for
CHA to execute the Code, the Initiative is adverse as it denies CHA the precise,
fundamental benefit of its bargain.

Finally, testimony at hearing asserted the

Initiative is adverse as it would result in a costly campaign of opposition and a


loss of confidence in the hospital industry.

UHW Responsibility
Beginning in April 2015, UHW's actions in support of the 2016 Executive
Compensation Initiative included, among many activities:

Threatening to file the initiative

Drafting the Initiative

Hiring consultants and authorizing them to conduct polling

Providing Selzer and Tracey with the final language of the Initiative to be
filed with the California Attorney General

Developing a campaign plan

Contributing $3 million to a political fund to support the Initiative

Announcing the submission of signatures in support

Based on the above, I am persuaded that UHW pursued, sponsored and


supported the Initiative in violation of the Code.

I also recognize that the

Califomia Election Code requires that only electors (real persons) may be the
named "proponents" of any initiative.'^ Thus organizations such as UHW may not
be "proponents." In the absence of any contrary evidence, given their official
positions with UHW, and the abundant evidence of UHW's extensive support and
control of the development of the Initiative, I am compelled to find that Selzer and
The primary difference in the two initiatives is that, in addition to the not-for-profit hospitals that
were included in the 2014 initiative, the 2016 initiative also includes for-profit and district (certain
public) hospitals.
Cal. Elec. Code Section 321, 9001.

28

Tracey, at a minimum, are acting as "surrogates " for UHW.'^ I also note that in
connection with prior initiatives, and with other employees as proponents, UHW
successfully caused filed initiatives to be effectively withdrawn. As such, and as
Section I.B.I prohibits the use of surrogates to carry out otherwise prohibited
activities, I am persuaded that UHW remains responsible for the 2016 Executive
Compensation Initiative and is fully capable of determining its future course.
Under all these circumstances, I am compelled to find that UHW directly and
through the actions of its surrogates Selzer and Tracey breached the Code.

D. Damages
Section 3360 of the California Civil Code provides:
"Where a breach of duty has caused no appreciable detriment to the party
affected, he may yet recover nominal damages." Based on this principle, I am
persuaded that the "damage" element of the cause of action is established
merely by the Union's numerous breaches of specific proscriptions in the Code
described above, independent of whether CHA can also establish defined,
tangible damages.

Moreover, I am persuaded by the testimony that further

damages may include the financial burden of opposing the Initiative as well as,
whatever the outcome, harm to the reputation of the hospital industry.

VIII. THE REMEDY

CHA's Position
CHA argues that the only rational remedy is an injunction requiring UHW and/or
its surrogates Selzer and Tracey to withdraw the Initiative. Only an injunction
requiring termination of the Initiative will restore to CHA the fruits of its bargain,
an election cycle in 2016 that does not include any initiatives backed by UHW
that are adverse to CHA or the hospital industry.

Although at the outset of the hearing, UHW expressed an intent to demonstrate that Selzer and
Tracey were acfing independently, if never offered any evidence on that issue and did not call
either of fhem as witnesses.

29

UHW'S Position
UHW contends that an injunction is beyond my authority and in any event not
permitted under all the circumstances of this case. The absence of a cognizable
threat of future injury, the balance of equities and other

considerations

demonstrate that CHA is not entitled to injunctive relief of any form.

UHW asserts that California Civil Code section 3422 precludes injunctive relief
because the expiration of the Code means there can be no future breach and no
basis to enjoin an event that cannot happen. In addition, UHW argues that a
balancing of equities weighs against any injunction as preventing the Initiative
from continuing would constitute an assault on freedom of speech and would
harm the public by denying voters in California the opportunity for input on a
matter of public interest.
injunctive relief.

Consequently, CHA is not entitled to any form of

USW further argues that the Code incorporates a strategic

partnership (the LMC) that contemplates a series of discrete and evolving efforts
as the Parties cooperate in support of the objective of increased Medi-Cal
funding.

As these loosely defined obligations are incapable of specific

enforcement, the arbitrator may not issue an injunction. Long Beacti Drug Co., v.
United Drug Co., 13 Cal 2d 158 (1939).

The Arbitrator's Authority


In this regard I am persuaded that as arbitration is a creature of contract, my
authority is specifically derived from and restricted by the terms of the Code. In
addition, as expressed in a case cited by CHA, arbitrators "fashion relief they
consider just and fair under the circumstances existing at the time of arbitration,
so long as the remedy may be rationally derived from the contract and the
breach." Advanced t\Aicro Devices, Inc. v. Intel Corp., 9 Cal. 4th 362, 383 (1994).
Recognizing the latitude the parties enjoy in creating the scope of any arbitration
agreement, the Court observed that "an arbitration panel may grant equitable
relief that a court could not." Id. at 389. I am persuaded that Section III.B of the
Code imposes no limitations on my authority beyond the general principles

30

described above.

Indeed, consistent with this interpretation, following a prior

arbitration under the Code, remedies in the form of equitable relief have been
granted. SEIU-UHW and Mission Hospital, (June 26, 2015).

In addition, as argued by CHA, more recent judicial doctrine rejects the teaching
of Long Beach above, instead relying on a test of whether specific performance
is "practically feasible."
(2012).

Husain v. McDonald's Corp., 205 Cal. App. 4th 860

Significantly, as the Code has terminated, there is virtually no future

performance that might require monitoring.

In light of the foregoing, I am

persuaded that concern about specific performance presents no impediment to


equitable relief here. Rather, I conclude that I have the authority to provide a
remedy, including equitable relief, "as long as the remedy is rationally related to
the contract and the breach." Sivan Magnetics, Inc. v. Superior Court, 56 Cal.
App. 4th 1504, 1511 (1997).

Expiration of the Code


UHW relies on the following from California Civil Code section 3422 that provides
the statutory basis for a permanent injunction:
[A] final injunction may be granted to prevent the breach of an obligation
existing in favor of the applicant: 1. Where pecuniary compensation would not
afford adequate relief; 2. Where it would be extremely difficult to ascertain the
amount of compensation which would afford adequate relief
UHW asserts that as the Code has expired, and as neither party can engage in a
future breach, there is no basis to enjoin an event that cannot occur. In addition,
an expired contract such as the Code cannot establish an "existing obligation,"
an element required by the California Civil Code in order that a pennanent
injunction may issue. UHW cites several California court cases in support of its
contention that with the expiration of the Code, there is no basis to obtain an
injunction as there is nothing left to enjoin.'^

See Griffith v. Dept of Public Wori<s. 52 Cal. 2d 848 (1959); Hidden Harbor, Inc. v. American
Federation of Musicians, 134 Cal. App. 2d 399 (!955).

31

In this regard I find persuasive CHA's observation of the following discussion of


circumstances that do or do not present a possibility of injunctive relief after
contract expiration:
'The significant distinction between Scripps and Gold on the one hand and
Warsaw and Volpicelli on the other, is that in Scripps and Gold the harm the
injunction was sought to prevent had already occurred. It could not be undone,
and, since there was no indication the conduct causing the harm would recur,
there was nothing left to prevent. In Warsaw and Volpicelli, however, the harm
was a continuing interference with the plaintiffs rights, which could be prevented
by granting an injunction." Sahlolbie v. Providence Healthcare, Inc. 112 Cal.
App. 4th 1137 (2003).
I am persuaded that the issue before me cleariy falls into the second category
described above and that the cases on which UHW relied are distinguishable.
Thus, the harm that CHA is seeking to prevent, the placement of the Initiative on
the November 2016 ballot, has not yet occurred and continuation of that harm
can be prevented by an injunction. Moreover, an injunction would not be a futile
act, as pursuant to the Califomia election code, the proponents may withdraw an
initiative after filing at any time before the Secretary of State certifies the
measures qualified for the ballot.'^ In this case, June 30, 2016 is the deadline for
any such withdrawal.

Mootness
UHW also argues that CHA's request to enjoin the submission of signatures in
support of the Initiative must be denied because the requisite number of
signatures to qualify the Initiative have already been submitted to the appropriate
County election officials for verification. Accordingly, UHW asserts that CHA's
request in this regard is moot.

In response to this specific argument, CHA contends that it has never restricted
its request for relief to an injunction only preventing the submission of signatures.
Rather, it has sought "all appropriate remedies, in addition to an order requiring
the withdrawal of the Initiative."

Although UHW is correct that the submitted

''^ Cal. Elec. Code SecUon 9604 (b).

32

signatures are a completed act, the Initiative has not yet qualified for the ballot.
Under these circumstances, 1 am persuaded that an injunction is not moot as the
Initiative could still be withdrawn.

First Amendment Considerations


UHW also argues that the balancing of equities test militates against any
injunction. In this regard, UHW asserts that an injunction would deny the public
in California the opportunity to vote on the initiative, thereby directly infringing on
First Amendment freedom of speech principles.

In support of its First Amendment argument, UHW argues that an injunction


would violate the well-established principle that prior restraint on speech activities
is invalid. In this regard UHW asserts that rather than maintaining the status quo,
the injunction CHA seeks would prohibit UHW from engaging in future political
speech. Moreover, public policy concems outweigh the uncertain harm to CHA,
as an injunction would deny Califomians the opportunity to vote on an issue of
public concern.

On the other hand, the threatened harm to CHA is highly

speculative, dependent upon the outcome of a public vote.

With regard to concerns about interference with First Amendment rights, I concur
with CHA that arbitrators may grant relief that a court could not. Kelly Sutherlin
v. Schneickert, 194 Cal. App. 519, 530 (2011). (requiring retraction of defamatory
speech).

Moreover, courts have concluded that provisions in collective

bargaining agreements waiving a party's right to engage in certain First


Amendment political activity are enforceable. Leonard v. Clark, 12 F. 3d 885 (9th
Cir. 1993). In addition, such waivers may be extended beyond the organization
party to the contract to include "agents, servants and employees, whether acting
directly or indirectly..." Democratic National Committee v. Republican National
Committee, 673
circumstances

F.3d

192 at 206-07 (3rd. Cir. 2012).

Similar to the

in the above cases, UHW waived its right to engage in any

activities in support of an executive compensation initiative during the term of the

33

Code. Accordingly, 1 likewise reject UHW's contention that enforcement of its


obligation in the Code to refrain from supporting and filing such an initiative would
constitute an improper restraint on any First Amendment free speech rights.

Public Policy Concerns


With respect to UHW's public policy argument that voters in California would be
deprived of an opportunity to vote, I am not persuaded. In that regard I find it
significant that the injunction sought under the Code would not impose a
complete and extended ban against the Union's political or free speech activities
regarding compensation of hospital executives. For instance, it would not extend
to submission of a similar initiative in the next election cycle. Nor would it
interfere with the right of the Union to express its position to the public about that
issue independent of the current Initiative. Further, UHW itself has demonstrated
that these same public policy concerns are insignificant in comparison to
enhanced organizing opportunities. Thus, by agreeing in D.3 of the Code to not
pursue placing two pending initiatives on the ballot and by agreeing not to file an
initiative during the term of the Code, UHW has on multiple occasions acted
contrary to this asserted public interest. Moreover, the right to either submit or
withdraw signatures, as UHW has done before, belongs to the proponents, rather
than to the public. Cal. Elec. Code, Sections 9032, 9604 (b). In consideration of
the foregoing, I find UHW's public policy concerns unpersuasive.

Unclean Hands
UHW argues that the unclean hands doctrine requires that CHA's requested
relief be denied because of its own misconduct that has been described above.
Thus, a wrongdoer whose conduct violates conscience, good faith or other
equitable standards may not enjoy I h e fruits of his transgression." Precision Co.
V. Automotive Co., 324 U.S. 806, 814-15 (1945). Among the activities engaged
in by CHA that UHW argues particulariy compel application of the clean hands
doctrine include:

34

Beginning in at least October 2015, CHA's secret negotiations to form a


strategic alliance excluding both UHW and the LMC;

On October 25, 2015, reaching an agreement in principle with the new


coalition that would exclude both UHW and the LMC;

Disguising its intentions by purporting to support the LMC's Prop 30


extension;

Signing an agreement with the new coalition that excluded UHW and the
LMC and required CHA to not support the LMC initiative;

Following

November

3, 2015, engaging

in actions to create

the

appearance that the Code was still in effect.


UHW further asserts that certain acknowledgments by Adams and Laret
demonstrate that CHA was aware that its conduct was improper. Moreover, CHA
understood the time pressure for submission of any initiative and sought to
deprive

UHW

the

window

of

opportunity,

while

carrying

out

secret

communications with the new coalition to support submission of the joint


initiative.

An injunction would provide CHA an outcome they attempted, but

failed to achieve through duplicitous conduct.

In order to prevent such an

outcome, the clean hands doctrine compels denial of CHA's request.

In this regard I note that, beginning as eariy as June 2015, long before the
alleged misconduct by CHA, UHW set in motion its various efforts to place the
Executive Compensation Initiative on the ballot.

More fundamentally, I have

found that the conduct on which UHW relies was neither in violation of the Code
nor adverse to the interests of UHW in increasing funding for Medi-Cal. Further,
UHW has consistently conditioned its willingness to forego proceeding with the
initiative on CHA's succeeding in helping the Union increase its membership, an
issue unrelated to the conduct regarding the ABC coalition.

In light of the

foregoing, I am persuaded that the conduct attributed to CHA does not


demonstrate unclean hands.

35

Califomia Labor and Elections Codes


As the California Elections Code provides that proponents of any initiative must
be natural persons, and as the California Labor Code allegedly prohibits an
employer from controlling or interfering in the political activities of their
employees, UHW contends that it lacks authority to require its employees Selzer
and Tracey to withdraw the Initiative. Moreover, even if UHW attempted to do so,
UHW and its managers would be subject to criminal penalties under the
California Labor Code. Thus the arbitrator cannot require UHW to perform an
illegal and impossible act.

In this regard I agree with CHA that the case on which UHW relies in support of
the Labor Code argument is distinguishable. Mitchell v. International Association
of Machinists, 196 Cal. App. 2d 796 (1961).

In that case, unlike here, by

engaging in activities in support of "right to work" laws, a position in direct conflict


with a central value of the union, the individuals were acting contrary to the
interests of the union. Under those circumstances, by expelling the individuals
from membership, the union was interfering with political activity that the union
opposed. Here, by contrast, Selzer and Tracey are unquestionably carrying out
the will of UHW; thus, the concerns that animated Mitchell are absent here.
Accordingly, I am persuaded that Mitchell provides no support for denying an
injunction.

I also recognize that UHW has in the past successfully assumed responsibility for
withdrawing similar initiatives, with its employees as proponents. Indeed, it did
so in 2014 as a condition to entering the Code, with two other employees who at
that time served as the proponents. Moreover, the Union has failed to
demonstrate

any

changed

circumstances

that

would

prevent

accomplishing a withdrawal of the initiative as it has done in the past.

it

from

In light of

the foregoing, I find that neither the Califomia Elections Code nor the Califomia
Labor Code present impediments to the relief CHA requests.

36

Alleged Harm to CHA


Based on the settled principle that a party is entitled to injunctive relief only if it
can demonstrate a threat of future injury to it if no injunction is granted, UHW
contends that CHA is unable to show that any harm would be directed at it or
even that any harm would necessarily occur. In particular, with respect to CHA's
assertion that it would need to expend millions of dollars to oppose the ballot
initiative, any such expenditure is voluntary rather than compelled.

Stated

differently, CHA has no legal or other binding obligation to oppose the Initiative.
Indeed, CHA witness McLeod acknowledged that CHA would not be assuming
the cost of the campaign directly, but rather would make assessments to the
hospitals. UHW thus argues that as any harm to CHA is voluntarily imposed and
speculative, it fails the required element of "naturally and necessarily" resulting
from the UHW's alleged breach. Lewis Jorge Construction Management, Inc. v..
Pomona Unified School Dist., 34 Cal 4th 960, 968 (Cal. 2004).

Although UHW is correct that CHA is under no legal obligation to oppose the
Initiative, I am persuaded that as a practical matter, it has no choice.

Thus,

insulation from this type of initiative, at least until the November 2018 election
cycle, was the very catalyst that induced CHA to enter the Code.

The Code's

prohibition on adverse initiatives and CHA's active involvement in the LMC as an


arm of the Code reflect the reality that CHA's desire to avoid balloting on such
issues represents an important and core interest. In light of the foregoing. I am
persuaded that the institutional interests of CHA would compel an active (and
expensive) campaign against the Initiative.

In addition, according to Blanchard-Saiger's testimony, beyond the millions of


dollars that would be incurred in opposing an initiative, there would also be
incalculable damage to the reputation of the hospital industry as a result of any
campaign.

Further, although the funds would largely come from assessments

from member hospitals rather than from CHA itself, it is apparent that those funds
could otherwise be spent seeking to increase funding or engaging in other

37

activities more directly related to patient care. Of course, the precise extent of
the harm is admittedly uncertain, as the election outcome would determine the
full extent of the harm. Nevertheless, despite such uncertainty, I am compelled
to find that the above considerations, particulariy the Code's express prohibition
against the initiative, demonstrate that CHA will "naturally and necessarily" suffer
significant harm if the Initiative is allowed to proceed.

Non-Party Proponents
Relying on the Federal Ariaitration Act and judicial decisions that have vacated
arbitration awards that resolved obligations of non-parties, the UHW argues that
any injunctive relief that might extend to the individual proponents of the Initiative
is beyond the authority of this Arbitrator. Morgan Keegan & Co. Garrett, 816 F.
Supp. 2d 439 (S.D. Tex. 2011). Although the Morgan Keegan court vacated the
arbitration award, I find the facts distinguishable from this matter. In that case,
the court vacated the award based on an interpretation of the Financial Industry
Regulatory Rules that limit arbitrations to customers or to those who agreed to
FINF?A arbitration before the dispute arose. As the claimants satisfied neither of
those conditions, the arbitrator lacked authority. Here, no similar limitations on
the arbitrator's authority are incorporated in the Code. Moreover, Section I. B.l.
specifically prohibits the Parties from using surrogates to engage in any activity
not permitted by the Code.

In addition, as CHA contends, it is well established that courts commonly enjoin


agents, employees or others, who were engaged in active participation or concert
with the named party, even though they were not named parties in the case.
NewLife Sciences v. Weinstock, 197 Cal. App. 4th 676 (2011). Ariaitrators have
similar authority. Comedy Club v. Improv West Assocs., 553 F.Sd 1277, 1287
(9th

Cir.

2009).

Here,

pervasive

evidence

demonstrates

UHW's

direct

involvement in all aspects of drafting the Initiative, hiring the necessary attomeys
and a polling finn, developing a campaign plan, arranging to obtain a title and
summary and contributing $3 million for a signature gathering firm. Further, as

38

required by California election laws, and as UHW did with respect to its 2014
Initiative as well as the LMC initiative, it used two employees as the proponents.
In light of all these circumstances, I am persuaded that 1 have the authority to
extend a remedy to the surrogates of UHW, and in particular to the proponents,
Selzer and Tracey.

In conclusion, for the reasons expressed above, I am persuaded that a balancing


of the equities compels the conclusion that an injunction is rationally related to
UHW's breach of pursuing and filing the Initiative and is necessary to prevent
irreparable harm.

IX. CONCLUSION

Based on the rationale above and in light of all the circumstances discussed
above, I am persuaded that UHW breached its obligations under the Code by its
numerous actions in support of the Executive Compensation Initiative. I am also
persuaded that Selzer and Tracey have acted as the Union's surrogates and/or
agents and that any remedy must extend to them.

Having found that CHA has satisfied ali elements of a cause of action and that
UHW's defenses are unavailing, I tum to consideration of what will be the
appropriate remedy under all circumstances.

CHA urges that I should enter:


(1) a partial final award prohibiting UHW and its employees, agents and those
acting in concert with them from pursuing, sponsoring or supporting the 2016
Executive Compensation Initiative, including a requirement that they withdraw
that Initiative pursuant to California elections code section 9 604 (B), and take
any other action necessary to tenninate their pursuit, sponsorship and support;
and (2) retain jurisdiction to enter a supplemental award if the enjoined parties

39

delay or otherwise avoid compliance with the injunction so as to render it


ineffective.

CHA asserts that the California courts have recognized that an arbitrator may
resolve certain critical areas of dispute in a "partial final award" and also reserve
jurisdiction to later decide by a "final award" implementation issues that might
subsequently arise. Hightower v. Superior Court, 86 Cal. App. 4th 1415 (2001).
As noted in Hightower, the choice of remedy "may at times call on any decisionmaker's flexibility, creativity and sense of faimess."

Id at 1427. However, the

remedy awarded "must bear some rational relationship to the contract and the
breach." Id at 1429. Significantly, the Code provides no restrictions that would
preclude the arbitrator from fashioning a remedy that is appropriate to the
particular circumstances.

Pursuant to the above standards and my conclusions set forth above, I must
provide a form of relief that is just and fair under all circumstances. The Initiative
sponsored by UHW constitutes the precise harm that motivated CHA to enter the
Code. Insulation from any such initiative during the 2016 Election cycle was the
precise benefit CHA obtained in the Code, as reflected in specific language
prohibiting "pursuit" of adverse initiatives during the term of the Code. For CHA,
the fruit of the bargain was the absence of such initiatives in both the 2014 and
2016 elections cycles.

Further, calculation of the precise harm to CHA is difficult at best. Cleariy, any
campaign at the statewide level is extremely costly, with estimates in the tens of
millions of dollars. According to testimony of witnesses on behalf of CHA, the
quality of healthcare would suffer if the Initiative is passed.

On the other hand,

UHW contends that savings achieved through implementation of the Initiative


would benefit the healthcare system.

I am not in a position to make any

assessment about the relative merits of the Initiative. I do recognize, however,


that a campaign would be extremely costly and disruptive. In addition, whatever

40

the outcome, the risk of damage to the reputation of hospitals in California exists.
Further, an injunction places UHW in the position to which it agreed upon
entering the Code. An injunction would not prohibit UHW from sponsoring or
supporting a similar initiative in future election cycles, nor would it prohibit UHW
from any other political activity concerning this or any other issue. Further, any
cost that UHW has incurred to date in connection with the Initiative resulted from
a decision it made of its free will.

In light of all these circumstances, and for the reasons expressed above, I am
compelled to conclude that a cease and desist order and an injunction is
appropriate and that it should extend to UHW, its agents, employees and
surrogates, including Selzer and Tracey, and those acting in concert with them. I
further agree that it is appropriate to issue an injunction in a partial final award
and to retain jurisdiction for purposes of considering damages or other relief if the
Initiative remains on the 2016 ballot.

In reaching my above conclusions, 1 addressed only those matters I deemed


necessary for a proper resolution, but did consider the well articulated arguments
of the Parties, including the authorities and evidence on which they relied, even if
not specifically addressed in this Opinion.

41

AWARD

Based on careful consideration of the evidence and the arguments of the Parties
in their entirety, I issue the following Partial Final Award:

1. The Complaint is sustained.


2.

UHW, including but not limited to its agents, employees and surrogates
Selzer and Tracey, and those acting in concert with them, are prohibited
from

pursuing,

sponsoring

or

supporting

the

2016

Executive

Compensation Initiative.
3. UHW, including but not limited to its agents, employees and surrogates
Seltzer and Tracey, and those acting in concert with them, are directed to
immediately

withdraw

the

2016

Executive

Compensation

Initiative

pursuant to California Election Code Section 9604(B) and take any other
action necessary to terminate their pursuit, sponsorship and support of
that Initiative.
4. I will retain jurisdiction for the purpose of considering damages or other
relief if the 2016 Executive Compensation Initiative appears on the
November 2016 ballot.

Respectfully submitted.

Richard L. Ahearn
Arbitrator
June 6, 2016

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