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F. Curt Kirschner, Jr. (State Bar No. 122502)


Matthew J. Silveira (State Bar No. 264250)
Kelsey Israel-Trummel (State Bar No. 282272)
JONES DAY
555 Califomia Street, 26th Fl<3or
San Francisco, eA 94104
Telephone: (415)626-3939
Facsimile:
(415) 875-5700
Email:
ckirschneri@JbnesDay.cpn)
msilveira@JpnesPay:cpm
kitrummel@Joniesbay.c6rn

ills SEP-6 PM 2:57


GDSSC COURTHOUSl.:
SUPERIOR COURT
OF CALtFORNIA
SAGRAMENTO COUNTY

Jeffrey A. LeVee (State Bar No.. 125863);


JONESDAY
555 South Flower Street, Fiftieth Floor
Los Angeles, CA 90071
Telephone: (213) 489-3?39
Facsimile:
(213)243^2539
Email:
jlevee^biiesDay.com
Attomeys for Petitioner
CALIFORNIA HOSPITAL ASSOCIATION

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SUPERIOR COURT OF THE STATE OF CALIFORNIA

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COUNTY OF SACRAMENTO

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CALIFORNIA HOSPITAL ASSOCIATION,

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Petitioher,

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V.

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SEIU, UNITED HEALTHCARE WORKERS


-WEST, and DOES 1-10,
Respondent.

Case No. 34-2016-00189567


PETITIONER CALIFORNIA
HOSPITAL ASSOCIATION'S
NOTICE OF PETITION AND
PETITION TO COMPEL
ARBITRATION; MEMORANDUM
OF POINTS AND AUTHORITIES
[Filed Concurrently with Declarations pf
F. Curt Kirschner, Jr. and Gail M.
Blanchard-Saiger]

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Date: September 30, 2016


Time: 2:00 p.m.
Dept: 53
Hon. David I. Brown

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Petition Filed: September 6, 2016
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BY hnM
NOnCE OF PETITION AND PETITION TO COMPEL ARBITRATION

TO RESPONDENT AND ITS COUNSEL OF RECORD:

PLEASE TAKE NOTICE THAT on September 30,2016, 2016 at 2:00 p.m., or as soon

thereafter as may be heard, in Department 53 of the above-entitled court, located at 813 6th Street,

Sacramento, Califomia, before the Honorable David I. Brown, Petitioner CALIFORNIA

HOSPITAL ASSOCIATION ("CHA") will, and hereby does, peHtion the Court for an Order

under Califomia Code of Civil Procedure section 1281.2 compelling arbitration before Arbitrator

Richard Aheam of a complaint brought by CHA against Respondent SEIU, UNITED

HEALTHCARE WORKERS ~ WEST ("UHW") under the parties' written arbitration agreement,

which UHW has refused to arbitrate.

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CHA's petition is based on this notice of petition and petition, the accompanying

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Memorandum of Points and Authorities, the concurrently-filed Declarations of Gail Blanchard-

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Saiger and F. Curt Kirschner, Jr., and upon all such other matters and arguments as may be

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presented to the Court at or prior to the hearing on this petition.

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Pursuant to Local Rule 1.06 (A), the court will rnake a tentative ruling on the merits of

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this matter by 2:00 p.m., the court day before the hearing. TTie complete text of the tentative

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rulings for the department may be downloaded off the court's website. If the party does not have

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online access, they may call the dedicated phone number for the department as referenced in the

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local telephone directory between the hours of 2:00 p.m. and 4:00 p.m. on the court day before

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the hearing and receive the tentative mling. If you do not call the court and the opposing party by

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4:00 p.m. the court day before the hearing, no hearing will be held.

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Dated: September 6,2016

JONESDAY

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By:

CuM jkUc/iMM h .^^.r

F. Curt Kirschner, Jr.


Attomeys for Petitioner
CALIFORNIA HOSPITAL ASSOCIATION

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NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION

PETITION TO COMPEL ARBITRATION

Petitioner Califomia Hospital Association ("CHA") alleges as follows:

I.

PARTIES AND OTHER RELEVANT PERSONS


1.

CHA is a membership association of hospitals and health systems in Califomia.

CHA collaborates with its members to provide strong and effective representation and advocacy

to advance the interests ofCalifornia hospitals, patients, and communities.

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2.

Respondent SEIU - United Healthcare Workers West ("UHW") is a union of

health care workers in Califomia.

3.

Caring For Califomians ("CFC"), a Labor Management Committee, is a nonprofit

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mutual benefit corporation organized under Cali fomia Corporations Code section 7110 er seq. at

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the agreement of CHA and UHW.

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CHA AND UHW ENTER AN ARBITRATION AGREEMENT


4,

On Miay 5, 2014, CHA, UHW, and a number of Califomia hpspitals and health

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systems entered into an agreement entitied the Code of Conduct. The Code of Cpnduct sought to

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"create a new model for labor relations that is based on cooperation rather than confi'ontation,"

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including by laying out "a labor-management relationship as reflected in the code of conduct" and

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ensuring that "every opportunity will be taken to resolve differences quickly and in a professional

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and non-confrontational manner." (Blanchard-Saiger Decl. Ex. A, Preamble [Code of Conduct].)

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5.

The Code of Conduct provided that the parties would "work cooperatively to

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resolve problems informally whenever possible." (Id. 111(A).) They agreed to designate an

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Arbitrator and agreed that he or she would "resplve any disputes over the application and

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interpretation of this Agreement." (Id. 111(6).) The parties also agreed that "[t]he Arbitrator

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[would] have final and binding authority to enforce this Agreement and resolve issues that rise

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during the course of this Agreement." (Id.)

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6.

On August 13, 2014, CHA and UHW selected Richard Aheam as the Arbitrator

for disputes under the Code of Conduct. (Blanchard-Saiger Decl. ^3.)


7.

On April 14,2015, the parties adopted a set of "Arbitration Procedures Pursuant

to the Code of Conduct" that, among other things, memorialized the designation of Arbitrator
NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION

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Ahearn. (Kirschner Decl. Ex. A [Arbitration Procedures].)


8.

Also as part of the Code of Conduct, the parties agreed "to establish an industry-

wide Labor Management Cooperation Committee (the 'Committee')," as permitted by the Labor

Management Cooperation Act of 1978, for various purposes set forth in the agreement.

(Blanchard-Saiger Decl. Ex. A, 11(A) [Gode of Conduct].) The parties agreed that the "hospitals

and health systems shall designate the Chief Executive Officer ('GEO') of CHA as their

representative on the Committee; the Unidri shall desi^ate the President of the Union as its

representative on the Committee .... The Committee shall not advance any agenda without the

approval of the GEO of GHA and the President of the Union." {Id. 11(A)(1).)

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9.

As agreed in the CPde of Conduct, the parties formed CFC to function as a Labor

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Management Cooperation Committee. (Blianchard-Saiger Decl. ^ 4.) CFC was incorporated on

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September 17, 2014, and organized as a nonprofit mutual benefit corporation under California's

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Nonprofit Mutual Benefit Corporation Law. (Blanchard-Saiger Decl. Ex. B [Articles of

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Incorporation].)

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10.

The Code of Conduct also provided that the parties would jointly fund CFG, and

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further agreed that, "[i]n the event this Agreement terminates ..; prior to the expenditure of the

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Committee fiinds^ unencumbered funds shall be distributed back to the parties in proportion to

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contributions made to the Committee." (Blanchard-Saiger Decl. Ex. A, 11 (A)(3) [Code of

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Conduct].)

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11.

Pursuant to the tenns of the Code of Conduct and its related Side Letter, UHW and

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GHA agreed toftrndCFG with an initial $50 million contribution, to be paid 80% by GHA and 20^o

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by UHW. (Blanchard-Saiger Decl. H 8 & Exs. A, E [Gode of Conduct; Side Letter].) GHA and

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UHW made these contributions to CFC in December 2014. {Id. H 8.)

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12.

CFC's Bylaws provide that "[t]he President of CHA, or whoever may succeed him

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or her as chief executive officer of CHA^ shall serve as Co-Chair [of CFG's Board of Directors]

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by virtue of his/her position." {Id. Ex. G, Art. IV, 3 [Bylaws].) GHA was also given therighttP

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designate three additional directors, each a "GHA Director." {Id.) Similarly, the Bylaws allocate

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four directors ta UHW ("UHW Directors"), including establishing the President of UHW as the
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NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION

other Co-Chair. {Id.) The Bylaws require that all acts of the Board be "approved by both Go-

Chairs plus at least two of the other CHA Directors and two of the other SEIU-UHW Directors."

(/</. Art. IV, 11.)

13.

Through its Board of Directors, GFG entered into contracts with an Executive

Director and Secretary to help manage its activities. (Blanchard-Saiger Decl. ^ 9.) It also entered

into contracts to engage legal counsel and an accountant, and leased office space. {Id.) Together,

these contracts represent approximately $40,000 in operating expenses each month fpr CFG. {Id.)

IH. THE CODE OF CONDUCT TERMINATES

14.

On Decerhber 31,2015, the Code of Conduct terminated pursuant to its terms,

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(Kirschner Decl. If 3.) Since that time, CFC has had no ongoing woric, and neither CHA, UHW,

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nor any GFG Director has made any efforts to initiate new endeavors; (Blanchard-Saiger Decl

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10.) Nonetheless, CFG has continued to spend approximately $40,000 each month on operating

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expenses for resources and services it has not been using. These are not only unnecessary

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expenditures, but they also decrease the amount available for redistribution to both, GHA and

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UHW as provided by the Gode of Conduct. {Id.)

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15.

Following termination of the Gode of Conduct, GHA requested that UHW agree to

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redistribute the unencumbered GFG funds to GHA and UHW, as provided in the Code of Conduct

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Specifically, on January 5, 2016, CHA's counsel wrote to UHW's counsel to confirm termination

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of the Gode and the required redistribution of unencumbered fijnds. (Kirschner Decl. Ex. B.)

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Three days later, at the next GFG Board of Directors meeting, the GHA Directors brought a

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resolution to redistribute the unencumbered GFG fiinds. (Blanchard-Saiger Decl. ^ 11.) UHW

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failed to respond lo CHA's counsel's communication, and the UHW Directors voted against

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redistribution. (Kirschner Decl. ^ 4; Blanchard-Saiger Decl. ^ 11.)

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16.

UHW also has refused all subsequent requests to allow the redistribution of

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unencumbered GFGftinds.This includes multiple requests by the GHA Directors at CFG Board

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Meetings, all of which the UHW Directors voted against (Blanchard-Saiger Decl. ^ 12), and a

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written request by CHA's CEO on behalf of GHA and its Directors on September I, 2016.

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(Blanchard-Saiger Ex. F.) In that request, CHA also asked that, at a minimum, UHW and its
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NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION

Directors agree to take appropriate steps to stop spending CFC fundswhich otherwise would be
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redistributed to GHA and UHW as provided by Section 11(A)(3) of the Gode of Conductoh

contractors, respurceSj and services that GFG is not using. {Id.) The first ofthe three complaints

was arbitrated in May of 2016, and on June 24, 2016, the Gourt confirmed the Arbitrator's

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Opinion and Award in CHA's favor. The second and third complaints are scheduled to be

arbitrated before Arbitrator Aheam on October 27 ahd 28, 2016. (Kirschner Decl. % 11.)

17.

As of September 1,2016, the CFG has approximately $34 niillion in its accounts

that is not currently encumbered. (Blanchard-Saiger Decl. ^ 16.) Pursuant to the terms ofthe

Gode of Conduct, approximately $27.2 million would be retumed to CHA and approximately

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$6.8 million would be retumed to UHW.

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IV.

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CHA DEMANDS ARBITRATION


18.

CHA served its arbitration complaint on UHW on January 15,2016, informing

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UHW that it viewed UHW's obstmcting the rietum of unencumbered funds as a breach of UHW's

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obligations under Section 11(A)(3) of the Code of Conduct (Blanchard-Saiger Decl. Ex. G.)

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GHA informed UHW that it intended to seek an order compelling UHW to agree to redistribution

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of fiinds, or directing such redistribution if UHW refused to agree. {Id.)

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19.

The complaint seeking redistribution of GFG funds was the last of four interrelated

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arbitration complaints filed by GHA against UHW arising from the deterioration of CHA's and

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UHW's relationship under the Code of Conduct between November 2015 ahd January 2016.

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(Kirschner Decl. ^ 5.) The first three complaints were the subject of a January 26,2016 Petition

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to Compel Arbitration to which UHW objected, arguing that its obligation to arbitrate terminated

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when the Code of Conduct terminated. (Kirschner Decl. Exs. C, D [Petition to Compel

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Arbitration; Opposition].) This Court rejected UHW's argument and granted CHA's Petition to

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compel arbitration before Arbitrator Aheam in a March 14, 2016 Order. (Kirschner Decl. Ex. E

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(Arbitration Order].)

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V.

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UHW REFUSES TO ARBITRATE


20.

When UHW did not respond to CHA's ari)itration demand, GHA sent a follow-up

communication requesting a response by Febmary 3, 2016. (Blanchard-Saiger Decl. ^ 15 & Ex.


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NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION

H ) UHW failed to respond by that date and has yet to provide a written response to the

substance of CHA's arbitration complaint. (Blanchard-Saiger Decl.^ 15.)

21.

Instead, after the Gourt ordered arbitratipn of CHA'sfirstthree complaints, UHW

opposed arbitration of CHA's fourth complaint, eventually responding to CHA's statement on

arbitrability in a brief entitled ''Opposition Regarding Arbitrability," which UHW served on GHA

and Arbitrator Aheam on April 20, 2016. (Kirschner Decl. ^ 8 & Ex, F [Arbitrability

Opposition].) In that brief, UHW argued that the question of arbitrability should be submitted to

a court in the first instance and also suggested that, notwithstanding the Court's Arbitration Order,

CHA's fourth complaint might not be arbitrable because UHW had npt agreed to arbitrate the

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complaint upPn receipt or because-the arbitrator might not have the authority to order CHA's

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requested relief {Id.) Arbitrator Aheam deferred to the Court the issue of whether UHW should

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be compelled to arbitrate this dispute. (Kiirschner Decl, Ex. G [Aheam Email].)

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22.

On July 7, 2016, after resolution of the first of the three complaints ordered to

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arbitration, CHA wrote to UHW to confirm CHA's intention tb move to corhpel arbitration of its

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fourth complaint regarding the redistribution of CFG funds. (Kirschner Decl. Ex. H [July 7, 2016

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Kirschner Email to Roy].) UHW continues to refuse to arbitrate this complaint.

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PRAYER FOR RELIEF

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WHEREFORE, GHA prays as follows

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1.

For an order compelling arbitration of CHA's arbitration complaint before

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Arbitrator Aheam pursuant to the terms of the written agreement to arbitrate pursuant to

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California Code of Civil Procedure 1281 et seq.;

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2.

That GHA be awarded its costs of suit; and

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3.

For such other and further relief as is just and proper.

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NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION

Dated; September 6, 2016

Jones Day

By: f

CJJAX 1^/U^l41//L Qly^xr


F. Curt Kirschner, Jr.
^

Attomeys for Petitioner


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CALIFORNIA HOSPITAL ASSOCIATION

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NOTICE OF PETITION AND PETITION TO COMPEL ARBITRATION

MEMORANDUM OF POINTS AND AUTHORITIES

TABLE OF CONTENTS

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Page
I.

INTRODUCTION.,

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ARGUMENT.........

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.1
.,

A.

CHA and UHW Agreed to a Broad Arbitration Provision

...,.,2

B.

This Dispute Falls Squarely Within the Arbitration Agreement's Scope................ 3

G.

UHW's Refusal to Arbitrate After the Code of Conduct's Termination is


Unjustified...
The Other "Issues" UHW Raised ih Refiising to Arbitrate Do Not Preclude
Arbitration....
.

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D.

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III.

CONCLUSION

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MEMORANDUM OF POINTS AND AUTHORITIES

i1

1I

TABLE OF AUTHORITIES

Page

CASES

Ajida Technologies, Inc. v. Roos Instruments, Inc.


(2001) 87 Cal.App.4th 534
Armendariz V. Foundation Health Psychcare Services, Inc.
(2000) 24 Cal.4th 83

Bos Material Handling, Inc. v. Crown Controls Corp.


(1982) 137 Gal.App.3d 99
Biickborn v. St. Jude Heritage Medical Group
(2004) 121 Cal.App.4th 1401

1^
11
12
13

15
'^
17
18
19

21
22

.3, 4
8
..5,6
3,6

Central Bank of Oakland v. Proctor


(1936) 5 Gal2d 237

10

Clone V. Foresters Equity Services, Inc.


(1997) 58 Gal.App.4th 625

10

Coast Plaza DoctorsMospital v. Blue Cross of Cal.


(2000) 83 Cal.App.4th 677

........2

Drews Distributing, Inc. v. Silicon Gaming, Inc.


(4th Gir. 2001) 245 F.3d 347

Garthofner v. Edmonds
(1946) 74 Gal.App.2d 15

Goodman v. Citizens Ufe & Casualty Ins. Co.


(1967) 253 Cal.App.2d 807

10

Jenks V. DL4 Piper Rudnick Gray Gary U.S. LLP


(2015)243 Cal.App.4th 1

10

Larkin v. Williams, Woolley, Cogswell, Nakazawa & Russell


(1999) 76 Gal.App.4th 227
,
.>..,.......
Litton Fin. Pfihting Div.. Inc. v. NLRB
(1991)501 U.S. 190

I, 8
4

23
24
25

Mansouri v. Superior Court


(2010) 181 Gal.App.4th 633
.-.
Merrick v. Writers Guild ofAmerica, West, Inc,
(1982) 130 Cal.App.3d2l2

........2
3

26
27
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Moticharsh v. Heily & Blase


(1992)3Gal.4th I
u
MEMORANDUM OF POINTS AND AUTHORITIES

Nolde.Brothers, Inc. v. Local No. 358, Bakery & Confectionaiy Workers Union
(1977)430 U.S. 293

5,6

2
3 I

Persson v. Smart Inventions, Inc.


(2005) 125 Gal.App.4th 1141

Secrest v. Securitv Nat. Mortgage Loan Trust 2002-2


(2008) 167 Gal.App;4th 544.......................

.9

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7

Uniied Transportation Union, AFL/CIO v. Southern Cal. Rapid Transit Dist.


{1992) 7 Cal.App.4th 804
Vianna v. Doctors' Miandgemeht Co.
(1994) 27 Gal.App.4th 1186

2
...3

8
9

Wells Fargo Bank, N.A. v. Bank ofAmerica


(1995) 32 Gal.ApR.4th 424 ..;.........vv....

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STATUTES

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Califomia Code of Givil Procedure 1281,2

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Califomia Code of Civil Procedure 1531

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.,..,..,....,,2
10

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iii
MEMORANDUM OF POINTS AND AUTHORITIES

I.

INTRODUCTION
On March 14, 2016, this Court ordered SEIU, United Healthcare Workers - West

("UHW") to arbitrate three complaints served by the California Hospital Association ("GHA")

arising from the deterioration of the parties' relaUonship under their May 5, 2014 Gode of

Conduct agreement, which terminated on December 31,2015. UHW how refuses to arbitrate a

fourth, related complaint brought by CHA. That fourth complaint seeks to enforce the parties'

agreement that, "[i]n the event this Agreement terminates .., prior to the expenditure o f funds

that the parties contributed to the Labor Management Cornmittee created pursuant to the Code of

Conduct, "unencumbered funds shall be distributed back to the parties in proportion to

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contributions made to the Committee," (Blanchard-Saiger Decl. Ex. A, 11(A)(3) [Gode Of

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Conduct].). UHW's primary basis for refusing to arbitratethat the Gode of Conduct has

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terminated and UHW did not specifically agree to arbitrate CHA's complaint upon receiptis a

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variation of an argurnent this Court already rejected \yhen it ordered arbitration of thefirstthree

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complaints.

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The law is clear that arbitration agreements are presumed to apply to any disputes that

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arise during the course of the underlying contract even if arbitration does not occur until after the

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contract is terminated. That mle extends to disputes that arise from the contract's termination.

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As this Gourt previously found, UHW's obligation to arbitrate survived termination ofthe Gode

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of Conduct. UHW cannot avoid arbitration ofa dispute that could only arise "[i]n the event [the

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Code of Conduct] terminates" by claiming that the termination extinguishes UHW's obligation to

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arbitrate that very dispute. Allowing UHW to avoid its arbitration obligations would eviscerate

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CHA's arid UHW's agreement to resolve disputes efficiently and result in needless court

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litigation,fiirtherdissipating fiinds contributed by the parties' respective hospital and union

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members. The Court should order the parties to arbitration before Arbitrator Aheam.'

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II.

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ARGUMENT
Califomia has a "strong public policy in favor of arbitration." {Larkin v. Williams,

' The factual back^ound of this dispute has been set forth in the accompanying Notice of
Petition and Petition and the Declarations of F. Curt Kirschner, Jr. ("Kirschner Decl.") and of
Gail M. Blanchard-Saiger ("Blanchard-Saiger Decl.").
MEMORANDUM OF POINTS AND AUTHORITIES

Woolley, Cogswell. Nakazawa & Russell {\999) 76 Gal.App.4th 227, 229.) The party opposing
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arbitration has the burden "to demonstrate that an arbih^tion clause cannot be interpreted to

require arbitration of the dispute." {Coast Plaza Doctors Hospital v. Blue Cross of Cai (2000) 83

Cal.App.4th 677, 686-687.) "Doubts as to whether an arbitration clause applies to a particular

dispute are to be resolved in favor of sending the parties to arbitration. The court should order

them to arbitrate unless it is clear that the arbitration clause cannot be interpreted to cover the

dispute." {United Transportation Union, AFL/CIO y. Southern Cal. RapidTransit Dist. (1992) 7

Cal.App.4th 804,808.) A court must compel arbitration upon finding: (1) the existence of an

arbitration agreerhent; (2) an arbitrable dispute; and (3) a refusal to arbitrate. (Seie Code Civ.

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Proc., \2%\.2\ Mansouri v. Superior Court (2010) 181 Cal.App.4th 633, 641.)

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All three elements are satisfied here.

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A.

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The existence of the arbiti-ation agreement is not in dispute. When CHA and UHW sighed

GHA and UHW Agreed to a Broad Arbitration Provision.

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the Gode of Conduct on May 5, 2014, they agreed that a "designated Arbitrator [would] resplve

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any disputes over the application and interpretation of this Agreement," and that "[t]he Arbitrator

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[would] havefinaland binding authority to enforce this Agreement and resolve issues that rise

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during the course of this Agreement." (Blanchard-Saiger Decl., Ex. A, III(B) [Gode of

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Conduct].)

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UHW does not, arid cannot, deny that it agreed to the Gode of Conduct as a whole, or that

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the Code of Conduct included a valid arbitration agreement. In its previous Arbitradon. Order, the

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Court found that '*[t]he existence of the arbitration agreement is not in dispute." (Kirschner Decl.

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Ex. E at p. I [Arbitration Order].) In fact, UHW "has previously acknowlediged thie force of the

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arbitration agreement by arbitrating other complairits before Arbitrator Aheam, as agreed by the

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parties." {Id. at p. 2.) Further, while UHW suggested in the "Opposition Regarding Arbitrability'

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it filed with Arbitrator Aheam that CHA's fourth cPmplatnt was not arbitrable, it nevier claimed

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that the agreement to arbitrate did not exist or was somehow inadequate. The parties indisputably

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have a valid, written arbitration agreement.

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Moreover, the scope of the arbitration agreement is "extremely broad. The parties agreed
2
MEMORANDUM OF POINTS AND AUTHORITIES

to arbitrate "any disputes over the application and interpretation" of the Code of Conduct, and

agreed that an arbitrator would "havefinaland binding authority to enforce .,. and resolve issues

that arise during the course o f the Code of Conduct. (Blanchard-Saiger Decl. Ex. A, III(B)

[Code of Conduct].) As recognized in the Arbitration Order, "similarly worded clauses are

broadly constmed to include all claims 'rooted in the ... relationship created by [the parties']

contract.'" (Kirschner Decl. Ex. E at p. 1 [Arbitration Order] [quoting Vianna v. Doctors'

Management Co. (1994) 27 Cal.App.4th 1186, 1188, 1190] [clause covering "any dispute of any

kind whatsoever, regarding the meaning, interpretation or enforcement of the provisions of this

Agreement"].)* The effect of the parties' agreement here is to require arbitration of "all

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controversies," arising from the Code of Conduct, "whether legal, factual, equitable, contractual

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or tortious." {Ajida Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 543-

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544 [interpreting a clause covering "[a]ny disputes over this Agreement"] [quotation marks and

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citations omitted].)

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B.

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The parties agreed in the Gode of Conduct to create and jointly fiind a Labor Management

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Committee, and that "[i]n the event this Agreement terminates or becomes null and void prior the

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expenditure of the Committeefiinds,uriencumbered funds shall be distributed back to the parties

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in proportion to contributions made to the Committee." (Blanchard-Saiger Decl. Ex. A, 11(A)(3)

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[Gode of Conduct].) As required by the Code of Conduct, the parties created and jointly funded

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Caring for Califomians, a Labor Management Committee ("GFG") in 2014. (Blanchard-Saiger

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Decl. Exs. B, G, E [Articles of Incorporation; Bylaws; Side Letter].) The Code of Conduct

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terminated on December 31,2015. (Kirschner Decl. ^ 3; see also Kirschner Decl. Ex. E at p. 3

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[Arbitration Order].) CHA's Complaint charges UHW with failing to comply with its obligation

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- For exanriple, in Merrick v. Writers Guild ofAmerica, West, Inc. {1982) 130 Cal.App.3d
212,217,219, a clause covering any dispute "conceriiing the interpretation of any of the terms of
[an agreement] and the application and effect of such terms as determined by an interpretation
diereof reached an action that sounded in tort because it had "roots in the relationship between
the parties which was created by the collective bargaining provisions of their agreement." Thus, a
clause covering disputes "conceming the enforcement or the interpretation of any provisions Of
this Agreement" includes even non-contract claims that are not "wholly independent" of the
contract. {Buckhorn v. St. Jude Heritage Medical Group (2004) 121 Gal.App.4th 1401, 1404,
1407.)

25
26
27
28

This Dispute Falls Squarely Within the Arbitration Agreement's Scope.

3
MEMORANDUM OF POINTS AND AUTHORITIES

under Section 11(A)(3) to facilitate redistribution of CFG funds upon the Gode of Conduct's

tennination, impairing CHA'srightto its share of the unencumbered funds. (Blanchard-Saiger

Decl. Ex. G.) The parties' disagreement is thus over the projjer application and interpretation of

the terms of the Code of Conducta dispute that falls squarely within the scope of the arbitration

agreement.

6
^

C.

UHW has refused to arbitrate CHA's complaint. In its Opposition Regarding Arbitrabilityi

UHW's Refusal to Arbitrate After the Code of Conduct's Termination is


Unjustified.

UHW claimed it had no arbitration obligations with respect to CHA's fourth complaint because,

10

unlike CHA'sfirstthree complaints, UHW had not "agreed to arbitrate CHA's Fourth Demand"

11

before the Code of Conduct terminated on December 31,2015. (Kirschner Decl. Ex. F at pp. 4-5

12

[Arbitrability Opposition].) UHW's attempt to avoid arbitration based on the Code of Conduct's

13

termination is unsupportable.

14

This Court's Arbitration Order makes clear that the parties' arbitration agreement survived

15

termination of the Gode of Conduct. (See Kirschner Decl, Ex. E at pp. 4-7 [Arbitration Order];

16

see also Litton Fin. Printing Div., Inc. v. NLRB, (1991) 501 U.S. 190, 205-206; Ajida, supra, 87

17

Gal.App.4th at pp. 545-546 [relying on Litton and "expressly hold[ing] that a party's contractual

18

duty to arbitrate disputes may survive termination of the agreement givingriseto that duty"].)

19

While the Gourt noted that UHW initially agreed to arbitrate thefirstthree complaints, the

20

significance of that agreement was that it "evidence[d] [UHW's] understanding that they had the

21

obligation to arbitrate the three disputes even after the contract terminated." (Kirschner Decl. Ex.

22

E at p. 6 [Arbitration Order] [emphasis added].) This fact was relevant not to whether those three

23

specific disputes were arbitrable, but rather to whether the arbitration agreement should be

24

interpreted as foreclosing post-termination arbitration altogether. Thus, while the fact that UHW

25

initially agreed to post-termination arbitration of thefirstthree complaints (before refusing to

26

arbitrate after the Gode of Conduct tenminated) remains relevant in determining whether the

27

arbitration agreement requires post-termination arbitration of the fourth complaint, the fact that

28

UHW did not separately agree to arbitrate the fourth complaint js immaterial.
4
MEMORANDUM OF POINTS AND AUTHORITIES

Nothing about the substance or timing of the fourth arbitration complaint undermines

UHW's obligation to arbitrate that complaint. In Nolde Brothers, Inc. v. Local No. 358, Bakery &

Confectionary Workers Union (1977) 430 U.S. 293, one of the cases the Court relied upPn ih its

Arbitration Order, a collective bargaining agreement provided for binding arbitration of

grievances between the parties and provided for severance pay upon termination of employment

for certain workers. {Nolde, supra, 430 U.S. at p. 246.) During a labor dispute, the union

cancelled the agreement and the employer promptly closed one of its bakeries, terminating the

employment of the unionized bakery staff (/rf. at p. 247.) Rejecting the company's argument

that the cohtractual obligation fb arbitrate terminated with the collective-bargaining agreement,

10

the Supreme Court held that "the parties did not intend their arbitration duties to terminate

11

automatically with the contract. Any other holdihg would permit the employer to cut off all

12

arbitration of severance-pay claims by terminating an existing contract siinultaneously with

13

closirig business operations." (Id. at p. 253.)^

14

Similarly, in Bos Material Handling, Inc. v. Crown Controls Corp. (1982) 137

15

Cal.App.3d 99, a dealer sued its supplier, claiming the supplier had wrongfully terminated the

16

parties'dealer agreement. When the supplier moved to compel arbitration, the dealer objected,

17

arguing that his claims did not fall within the agreement's arbitration provision. In concluding

18

that the claims fell within the scope of the arbitration agreement, the court did not distinguish

19

between claims that arose before and at termination. Instead, the court explained that the dispute

20

"center[ed] on the 'wrongful' termination or expiration of the dealer contract," and was therefore

21

"properiy arbitrable,... particulariy since the contract ha[d] specific provisions relating to

22

extension and termination." {Id. at p. 106; see also Moncharsh v. Heily & Blase (19921) 3 Gali4th

23

1, 28 [where attomey brought claims arisingfiromhis formerfirm'spost-termination allocation of

24

attomey's fees, those claims "clearly arose out of [his] employment contract," and the arbitrator

25

was "within his poweirs' in resolving the questions of law presented to him"].)

26

^ Although Nolde concemed a collective bargaining agreement, this Court already has
rejected UHW's argument that "the default mle, providing that arbitration obligations survive
contract termination, applies only in the collective bar^ining context," and held that the
"presumption favoring posttermination arbitration isriotlimited to the labor context." (Kirschner
Decl. Ex. E at 5:27-6:3 [Arbitration Order].)

27
28

MEMORANDUM OF POINTS AND AUTHORITIES

As in Nolde and Bos, the dispute here arisesfromthe termination of the contract

containing the arbitration clause. But, as in those cases, contract termination does not preclude

arbitration of the dispute or require "exten[sibn] or renew[al]" of the agreerhent to arbitrate by an

"oral or implied agreement." (Kirschner Decl. Ex. F at p. 5 [Arbitrability Opposition].) "[T]here

is little reason to constme [the Gode of Conduct] to mean that the parties intended their

contractual duty to submit grievances and claims arising under the contract to terminate

immediately on the termination of the contract; the altemative remedy pf a lawsuit is the very

remedy the arbitration clause was designed tp avpid." {Nolde, supra, 430 U.S. at p. 254.) These

concems have particular weight here. While UHW obstmcts the retum Pf unencumbered funds to

10

both itself and CHA, those fiinds continue to be spent by CFC on unnecessary operating expenses

11

(at a rate of roughly $40,000 per month), despite the fact that C FG has no ongoing work.

12

(Blanchard-Saiger Decl. ^ 10.) Cohstming the Code of Cpnduct to require litigation of this

13

dispute would result in the continued, wasteful dissipation of hospital and union member funds

14

that the Code of Conduct's arbitration agreement was designed to prevent

15

In summary^ the parties expressly agreed that the Arbitrator would have "final and binding

16

authority to enforce" the Gode of Conduct, and the retum of unencumbered funds contributed to

17

GFG upon the Code's termination is a fundaihental provision of the parties' agreement that now

18

requires enforcement. UHW's proposed "temporal test misconstmes the applicable standard.

19 I The issue tums on whether [CHA's] claims are 'rooted' in the contractual relationship between
20

the parties, not when they occurred." (5t/cAVio/-/j, ji/pra, 121 Cal.App.4th at p. 1407.) As in

21

Nolde and Bos, this dispute over the application and interpretation of the Gode of Conduct

22

survives the agreement's termination.

23

D.

The Other "Issues" UHW Raised in Refusing to Arbitrate Do Not Preclude


Arbitration.

24
25

In addition to its temporal argument, UHW hasraised,without authority or explanation,

26

several other "issues" that it claims affect the arbitrability of CHA's complaint for redistribution

27

of CFG's funds, including that: (1) CFC is not a party to the Code of Conduct; (2) CHA does not

28

have standing to seek redistribution of CFC's assets because it is not a CFC member; (3) CHA's
6
MEMORANDUM OF POINTS AND AUTHORITIES

complaint effectively seeks dissolution of CFG, which is not a proper subject for arbitration; and

(4) because CFC's Bylaws do not contain an arbitration provision but include provisions

conceming distribution of assets, the Bylaws may serve as a modification or novation of the

corresponding provisions of the Code of Conduct. (Kirschner Decl. Ex. F at pp. 5-6 [Arbitrability

Opposition].)'* None of these issues precludes arbitration.

With respect to UHW'sfirsttwo issues, UHW made a similar capacity-based argument in

cormection with CHA's third arbitration complaint, which related to UHW's lawsuit against the

CHA directors of GFG. According to UHW, that dispute was "not arbitrable because [UHW]

sued CHA's officers in their capacity as CFG directors," who are not parties to the Code of

10

Conduct, (Kirschner Decl. Ex. E at 3:15-17 [Arbitration Order].) As the Court explained,

11

however, "UHW agreed that it would not initiate litigation against any of CHA's officers, and

12

there is no exception ... permitting UHW to initiate litigation against CHA officers due to their

13

participation in the CFC." {Id. at 3:17-20.)

14

The same reasoning applies here. In the Code of Conduct, UHW agreed that any funds

15

that the parties contributed to CFG "shall be distributed back to the parties in proportion to

16

contributions made to" CFG, while recognizing that GFG, an entity that had not yet been formed,

17

would hold those funds. (Blanchard-Saiger Decl. Ex. A 11(A)(3) [Gode of Conduct].)^ There is

18

no exception permitting UHW and its surrogates to obstmct the retum of those funds by claiming

19

they would be required to participate in their capacity as CFC directors. Nor is there any

20

exception requiring GHA to act through its GFG directors in seeking the retum of CFG fxinds that

21

GHA contributed to CFC in thefirstinstance and to which GHA is contractually entitled. In the

22

To the extent that UHW re-asserts its opposition to arbitration before Arbitrator Aheam
on the ground that he is required to recuse himself because of his involvement in drafting the
Arbitration Procedures, that argument should be rejected for the same reasons the Arbitrator, this
Court, arid the Cburt of Appeal rejected the argument when UHWraisedthe argument in the
earlier arbitration, in its petition to vacate the award in favor of CHA, and in its petition for a writ
of mandate directed to the Court's Arbitration Order.
5 The parties agreed to the formation of CFG and the contribution of funds to that entity
for the specific reason that the contribution of funds by the union and the employers, and
expenditure of those funds by CFC, would comply with the Labor Management Cooperation Act
of 1978, not because the parties sought to surrender control over the funds. (See BlanchardSaiger Decl. Ex. A 11(A) [Code of Conduct].) To the contrary, the Gode of Conduct's provision
for the redistribution of funds upon termination ensured that the parties would retain control of
the fijrids.

^3
24
25
26
27
28

MEMORANDUM OF POINTS AND AUTHORITIES

Gode of Conduct, UHW agreed to the retum of the funds and UHW can direct its representatives

on the GFG Board to permit the retum of those funds, as CHA's GFG directors have called for in

repeated votes since the Gode of Conduct's termination. (See Blanchard-Saiger Decl. Ex. G, Art.

IV, sec. 3; see also Persson v. Smart Inventions. Inc. (2005) 125 Gal.App.4th 1141, 1159

[explaining that "courts will enforce preincorporation agreements among partners or joint

venturers who have incorporated in order to carry out the agreement between or among the

partners or joint venturers"].) That direction is entirely consistent with the stmcture of GFG and

the roles of the CHA and UHW Directors of GFGall are high-ranking leaders of their respective

organizations ahd all are serving on the GFG Board solely by virtue of their roles within those

10
11

organizations. (Blanchard-Saiger Decl. ^ 7 &Exs. A,G [Code of Conduct^ Bylaws].)


As to UHW's third issue, GHA is not seeking dissolution of CFG via its arbitration

12

complaint. Consistent with the Gode of Conduct's terms, GHA .seeks only the redistribution of

13

"unencumbered funds" to the parties (Blanchaird-Saiger Decl. Ex. A, II(AK3) [Code of

14

Conduct]), whereas dissolution under the Code of Conduct would require "winding up" the

15

corporation by distributing indivisible assets and assets held in charitable tmst as set forth in

16

CFG's Bylaws, and only then distributing "all net remaining assets" to the parties, (Blanchard-

17

Saiger Decl. Ex. G, Art. IX, 5 [Bylaws].) But even if CHA's complaint could be constmed as a

18

claim to dissolve CFC, UHW has cited no authority suggesting that dissolution claims are not

19

arbitrable. In fact, case law is to the contrary. (See, e.g., Z,arA7, ^wpra, 76 Gal.App.4th at p. 231

20

[affirming order to compel arbitration of claims including dissolution of a partnership].) Any

21

purported mle carving off substantive areas of lawfromarbitrafion would undermine Califomia's

22

strong public policy in favor of arbitration, and should be viewed with skepticism. {Armendariz v.

23

Foundation Health Psychcare Services, Inc. (2000) 24 Gal.4th 83,97.)

24
25

Finally, as to UHW's fourth issue, the absence of an arbitration agreement in CFC's


Bylaws is irteleviant. As explained.above, the parties' dispute over the redistribution Pf CFG

26 fimds is a dispute "over the application and interpretation" Of the Code of Conduct, requiring the
27

Arbitrator to resolve issues arisingfromthe contractual relationship. (See Blanchard-Saiger Decl.

28

Ex. A, III(B) [Code of Conduct].) As such, their dispute falls squarely within the Code bf
8
MEMORANDUM OF POINTS AND AUTHORITIES

Conduct's arbitration agreement.

Moreover, even where a dispiite arises under two distinct agreements, one with an

arbitration agreement and one without, a party cannot escape its arbitration obligations by

poiriting to the absence of an arbitration agreement in one agreement as long as the dispute fits

within the category of disputes covered by the arbitration agreement in the other agreement, In

Drews Distributing. Inc. v. Silicon Gaming. Inc. (4th Cir. 2001) 245 F.3d;347, 350, the court held

that where "parties contractually agreed to arbitrate 'any controversy or claim' ... 'arising out of

or related to' [a] Distributor Agreement," it \yas "imniatenal" that the dispute also "grew out of [a]

Letter Agreement, which contains no arbitration clause, if the dispute alsb ' relates to' the

10

Distributor Agreement." As in Drews, even if the dispute here could be constmed as growing out

11

of CFC's Bylaws, that dispute also falls within the Code of Conduct's arbitration agreement It is

12

iihrnaterial that the Bylaws do nbt also contain an arbitratipn agreement.

13

Nor is there any support fOr UHW's suggestion that CFG's Bylaws effected a novation or

14

modification ofthe asset distribution and arbitration provisions of the Code of Conduct. As an

15

ihitiar matter, bpth contract novation and modificatipn require muhial assent by the parties

16

concerhed. {Garthofner v. Edmonds {1946) 74 Gal.App.2d 15,20 ["An essential element of every

17

novation is a new contract to which all the parties concertied must agree."]; Secrest v. Security

18

Nat. Mortgage Loan Trust 2002-2 (2008) 167 Gal.App,4th 544, 553 ["A modification pf a

19

contract is a change in the obligations of a party by a subsequent mutual agreement of the

20

parties."].) The Bylaws, however, are nPt ah agreement between UHW and CHA, but rather were

21

adopted by CFC's sole incorporator. (Blanchard-Saiger Decl. Exs. G, D [Bylaws; Action of Sole

22

Incorporator].)

23

Even if CFC's Bylaws could be constmed as evidence of a separate agreement between

24

UHW and GHA, the Bylaws' content and the surrounding circumstances foreclose any conclusion

25

that the parties inteinded to novate the Gode of Conduct, or to modify that agreement so as to

26

carve put and eliminate any duty to arbitrate disputes that arise under the Code of Conduct.

27
28

Novation requires an intent "to exfinguishratherthan merely modify the original


agreement." {Wells Fargo Bank, N.A. v. Bank ofAmerica (1995) 32 Gal.App;4th 424, 432
9
MEMORANDUM OF POINTS AND AUTHORITIES

[quotation marks and citation omitted].) It is inconceivable that GHA and UHW would have, or

could have, replaced the Gode of Conducta contract between GHA, UHW, and numerous

health systems and hospitals designed to restmcture industry-wide labor relationswith CFC's

narrow Bylaws, which say nothing about labor relations and were drafted without involvement of

other signatories to the Code. {Goodman v. Citizens Life & Casualty Ins. Co. (1967) 253

Gal.App.2d 807, 816-817 [insufficient evidence of an intent to novate where sole alteration

related only to the termination clause, such that "[h]ad the parties abandoned the prior contract

and substituted the claimed [novation], the sole agreement would have consisted of a termination

clause without any uhderlj^ng contract"]; see also Civ. Code, 1531 [novation requires

10

"substitution of a new obligatiPn between the same parties"] [emphasis added].) Moreover, that

11

the parties negotiated and agreed upon the Arbitration Procedures and actually conducted

12

arbitrations after the Bylaws were adopted precludes any conclusion that they intended to, or

13

believed they had, extinguished their agreement.

14

As for modification, the Bylaws make no reference to the Gode of Conduct or the parties'

15

arbitration agreement, and do not include any altemative dispute resolution provisions. Where a

16

later agreement is "silent on the fomm for dispute resolution," the fact that the parties have an

17

earlier agreement containing an arbitration provision is "probative and admissible as not

18

inconsistent with the terms of such ... agreement," and "any doubts must be resolved in favor of

19

arbitration." {Clone v. Foresters Equity Services, Inc. (1997) 58 Cal.App.4th 625, 639; see also

20

Jenks v. DLA Piper Rudnick Gray Gary U.S. LLP (2015) 243 Gal.App.4th 1, 20 [concluding that

21

where a later agreement was "silent with respect to dispute resolution," the "parties did not intend

22

to override the arbitration provision" in their earlier agreement].) In short, the Bylaws have no

23

effect on UHW's arbitration obligations under the Gode of Conduct.^

24

^ To the extent UHW argues that the Bylaws' dissolution provisions affect the Gode of
Conduct's provision for redistribution of funds, that argument goes to the merits of the parties'
dispute and therefore is a matter for the arbitrator, not the Court. But the same analysis holds tme
The Bylaws' dissolution provision address a broader topic than the Code of Conduct's fund
redistribution provision and do not alter the latter directive in any way, for example by requiring
that fiinds GHA and UHW contributed to GFG be retumed in an altemative proportion, or that
such fiinds be paid out to third parties. Rather, the Bylaws' dissolution provisions provide that
any divisible assets not held in charitable tmst that remain in CFG upon dissolution are to be
redistributed in the same proportion as provided in the Gode of Conductto GHA and UHW in
the same proportion they were contributed to GFG. (Compare Blanchard-Saiger Decl. Exs. A, G
10
MEMORANDUM OF POINTS AND AUTHORITIES

25
25
27
28

1
2
3

HI. CONCLUSION
For these reasons, CHA's Petition to Cohipel ArbitratiOri should be granted.
Dated: September 6,2016

Johes Day

4
^

By:- F (miy ^WlAdWiM


F. Gurt Kirschner, Jr.

(k.A(.^x

6
Attomeys for Petitioner
CALIFORNIA HOSPITAL ASSOCIATION

'
8
NAI-ISOI86S49Sv4

9
10
IT
12
13
14
15
16
17
18
19
20
21
22
23
24
25 (continued...)
26
[Code of Conduct; Blyaws].) Thus, there is no basis to hold that the Bylaws modified the Code's
27 redistribution provision. {See Central Bank of Oakland v. Proctor (1936) 5 Gal.2d 237,241
[finding noriiodificationwhere purported modification resulted in the plaintiff recei ving "moneys
28 which the plaintiff was entitled tp receive under and by virtue ofthe original contract"].)
11
MEMORANDUM OF POINTS AND AUTHORITIES