Beruflich Dokumente
Kultur Dokumente
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
Appearances:
For Complainant:
F. Curt Kirschner, Jr.
Matthew J. Silveira
Kelsey Israel-Trummel
JONES DAY
555 California 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 31, 2015.
On November 30, 2015, CHA filed this complaint against UHW, alleging that
UHWs sponsorship of the Hospital Executive Compensation Act of 2016 (the
Initiative), violates subsections I.(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 UHWs establishment of a political fund in
support of the Initiative as an independent violation of the Code.
The arbitration hearing concerning 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 2016.1
With the filing of the Parties well-written and comprehensive post-hearing briefs
In addition to numerous documents entered into evidence, the following 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 Adams (Adams), National Vice President, Kaiser Permanente; 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 Attorney 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 California.
As a result, no such
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
California.
Although UHW took responsibility for these 2013 initiatives, the two
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 Workers-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-UHWs 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.
I. A Code of Conduct for a Healthy Relationship
A. Principles
It is in all Californians 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 on honesty, mutual
respect, trust 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;
5
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 Unions 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:
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
By June 30, 2015, UHWs chief of staff Greg Pullman initiated internal
discussion of the Unions resources to file an executive compensation
initiative.
Late August, UHW provided the initiative with its title and signed a contract
with a strategy group.
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.
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.
proponents, filed the request for circulating title and summary with the Attorney
General of California.3
At a December 11, 2015 UHW executive board meeting, in response to
questions about the Initiative, Regan explained:
On December 12, 2015, the Unions 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 Californians for Hospital Accountability and
Quality Care to support the ballot measure. On March 16, 2016 a press release
announced the Unions intention to submit sufficient signatures to qualify for the
November 2016 ballot.4
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
3
There is no record evidence that Selzer or Tracey had any involvement with the Initiative before
this date.
4
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 LMCs goals included joint advocacy
for various improvements in the healthcare industry, with a focus on obtaining
increased funding for Medi-Cal.5 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.6
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 UHWs 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
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 Unions proposal,
5
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.
6
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.7 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 UHWs apparently strained relationship with the
governor and the SEIU State Council.8
retained by the LMC, proposed 4 options, including having Dauner, Ragone and
Darrell Steinberg (Steinberg) engage in negotiations concerning ballot initiatives
with the Governors office, CTA and other stakeholders. Without endorsing any
particular final option, the LMC voted in favor of the following steps:
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.
8
Although SEIU-UHW is a member of the State Council, each is a distinct entity.
12
reports to the LMC alerted UHW that Dauner was also reaching out to
representatives of labor. Despite efforts by CHA to have UHW and the LMC
included in the discussions, both the Governors 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
UHWs involvement. At an October 20 meeting of CHAs Board of Trustees,
Dauners 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 fairly represented in the ABC Proposition
30 extension.
Various internal observations in October 2015 by CHAs representatives reflect
the somewhat tense dynamics as the deadline for choosing a path forward
13
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
governors office expressed the position described above.
Given the position of the governor, 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 coalitions initiative would serve the LMCs 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 Unions partnership with CHA and
the LMC going forward. According to Kieffer, UHW objected to CHAs conduct
but CHA said it didnt care.
14
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 Unions 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
In addition, UHWs
As the Union is no longer alleging that failure to 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. With no identifiable injury, CHA has no
basis to seek an injunction. 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 Arbitrators 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. Defendants breach; and
4. Damages to plaintiffs therefrom.10
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 CHAs Performance
UHW Contentions
In support of its contention that CHA failed to establish a cause of action because
10
17
it failed to perform its obligations, UHW asserts that the Codes 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, CHAs actions allegedly
violated its obligations to 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-UHWs 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, CHAs 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 of the 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 agreement with the ABC coalition on November 3, 2015, CHA
effectively abandoned its 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
confirmed 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.
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 CHAs alleged repudiation is reflected in Dauners
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 Regans assertion that CNA had reneged on its
obligations under the Code.
in various communications that CHAs actions violated the LMC agreement and
their obligations to act in good faith. The Union also contends that any doubt
about CHAs intentions is resolved by Dauners 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
performed all conditions on its part or that it was excused from performance.
Similarly, where defendants 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).
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.
A condition subsequent that the Union shall have rights under 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. Clearly, 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
CHAs 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
Dauners outside meetings, as he had been directed by the consultant to the
LMC to engage in negotiations with the Governors office and other stakeholders,
even if not the other labor organizations.
extremely displeased that the meetings were occurring, particularly without their
involvement, abundant evidence reveals that despite CHAs many efforts to the
21
contrary, it was the stakeholders that insisted UHW was not welcome. Further,
UHWs 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
framework 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.
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.
The
options included:
Convince the ABC coalition to join and pass the LMC initiative
Obtain the most votes in the November election for the LMC initiative
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
forward with the LMC initiative would at least preserve leverage in negotiating
with the ABC coalition and other stakeholders.
introduced at hearing demonstrate that in the fall of 2015, UHW was generally
aware that Dauner had been meeting with the Governors 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.
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 CHAs 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 II.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 early 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, CHAs participation in the new coalition at the
expense of the LMC initiative would not undermine UHWs goal of increasing
organizing opportunities. To the contrary, CHAs numerous attempts to develop
24
alternative strategies for helping UHW achieve increased membership belies any
intent to thwart the Unions organizing goals. In light of the foregoing, I am
persuaded that CHAs participation in the new coalition was not adverse to
UHWs interests.
Precedent
I further find that the teaching of Mammoth Lakes Land Acquisition, LLC v. Town
of Mammoth Lakes, a case relied upon by the Union, does not compel a finding
that CHA repudiated.11 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 developers
rights under the contract. Here, unlike a singular transaction that was the sole
object of the agreement in Mammoth, 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 UHWs rights under the Code.
Failure to Work Cooperatively
With respect to UHWs 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.
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
11
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 Party.12
There is no
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 CHAs 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 Unions goal of sufficient conditional access
agreements would not be achieved by the deadline in the Code and that the
12
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.13 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 CHAs 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, I find that CHA fulfilled its performance obligations
under the Code.
C. The Unions Alleged Breach
As provided in Sections II. C and I.B.I. of the Code, the Parties are prohibited
from:
13
Kieffer also agreed that a single initiative has a better chance of success.
27
Providing Selzer and Tracey with the final language of the Initiative to be
filed with the California Attorney General
California Election Code requires that only electors (real persons) may be the
named proponents of any initiative.15 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 UHWs extensive support and
control of the development of the Initiative, I am compelled to find that Selzer and
14
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.
15
Cal. Elec. Code Section 321, 9001.
28
Tracey, at a minimum, are acting as surrogates for UHW.16 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 Unions numerous breaches of specific proscriptions in the Code
described above, independent of whether CHA can also establish defined,
tangible damages.
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
CHAs 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.
16
Although at the outset of the hearing, UHW expressed an intent to demonstrate that Selzer and
Tracey were acting independently, it never offered any evidence on that issue and did not call
either of them as witnesses.
29
UHWs 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.
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.
enforcement, the arbitrator may not issue an injunction. Long Beach Drug Co., v.
United Drug Co.,13 Cal 2d 158 (1939).
The Arbitrators 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 Micro 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
17
See Griffith v. Dept. of Public Works, 52 Cal. 2d 848 (1959); Hidden Harbor, Inc. v. American
Federation of Musicians, 134 Cal. App. 2d 399 (!955).
31
32
signatures are a completed act, the Initiative has not yet qualified for the ballot.
Under these circumstances, I 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 concerns outweigh the uncertain harm to CHA,
as an injunction would deny Californians the opportunity to vote on an issue of
public concern.
Similar to the
33
34
Signing an agreement with the new coalition that excluded UHW and the
LMC and required CHA to not support the LMC initiative;
UHW
the
window
of
opportunity,
while
carrying
out
secret
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 CHAs succeeding in helping the Union increase its membership, an
issue unrelated to the conduct regarding the ABC coalition.
In light of the
35
any
changed
circumstances
that
would
prevent
it
from
36
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 UHWs 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 Codes
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, particularly the Codes 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 Arbitration 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
FINRA arbitration before the dispute arose. As the claimants satisfied neither of
those conditions, the arbitrator lacked authority. Here, no similar limitations on
the arbitrators authority are incorporated in the Code. Moreover, Section I. B.I.
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). Arbitrators have
similar authority. Comedy Club v. Improv West Assocs., 553 F.3d 1277, 1287
(9th Cir. 2009). Here, pervasive evidence demonstrates UHWs direct
involvement in all aspects of drafting the Initiative, hiring the necessary attorneys
and a polling firm, 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 I 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
UHWs 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 Unions surrogates and/or
agents and that any remedy must extend to them.
Having found that CHA has satisfied all elements of a cause of action and that
UHWs defenses are unavailing, I turn 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 terminate their pursuit, sponsorship and support;
and (2) retain jurisdiction to enter a supplemental award if the enjoined parties
39
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, I 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
42