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DATE: 01/13/2017 TIME: 11:10:00 AM DEPT: 54
CLERK: D. Ahee

CASE NO: 34-2016-00199120-CU-MC-GDS CASE INIT.DATE: 02/04/2016

CASE TITLE: David Regan on behalf of Caring for Californians LLC vs. C. Duane Dauner, et al
CASE CATEGORY: Civil - Unlimited


Nature of Proceeding: Ruling on Submitted Matter - Motion to Compel Arbitration and Stay
Defendants Dauner, et al. and Intervenor California Hospital Association's ("CHA") (collectively
"Defendants") joint motion (petition) to compel arbitration and to stay court proceedings pending
completion of arbitration is GRANTED as follows.
The Court notes that plaintiff's "opposition" was not timely filed in accordance with Code of Civil
Procedure 1290.6 but was nevertheless considered.
Although Code of Civil Procedure 1290 et seq. does not expressly permit a "reply" brief such as that
filed by Defendants, their "reply" was considered.
Factual Background
This action relates to the governance of a non-profit entity called Caring for Californians, LLC ("CFC"),
which was formed jointly by SEIU, United Healthcare Workers - West ("UHW") and CHA pursuant to the
Code of Conduct agreement ("Code") which the presidents of these two entities executed in May 2014.
CFC is described in the First Amended Complaint ("1AC") as "a joint advocacy committee established
under the Labor Management Cooperation Act of 1978 and organized under California's Nonprofit
Mutual Benefit Corporation Law" in order to improve communications between labor and management,
improve organizational effectiveness, etc. CFC's by-laws dictate that its Board of Directors shall consist
of two Co-Chairs, one being the President of CHA and the other being the President of UHW, with each
Co-Chair then "designating" three additional directors from their respective organizations.

Plaintiff Regan is President of UHW and thus, a Co-Chair of CFC. He is now suing on behalf of CFC,
alleging that defendant Dauner, President of CHA and the other Co-Chair of CFC, along with the three
other directors designated by CHA have violated their duties of loyalty, good faith, honesty and candor in
connection with their votes to authorize the expenditure of CFC funds in an attempt to qualify for the
November 2016 ballot an initiative for Medi-Cal funding while simultaneously believing and/or intending
this initiative would not be placed on the ballot, as well as defendant Dauner's threat to effectively veto
any further spending in support of a ballot initiative. Plaintiff contends Dauner is effectively preventing
CFC from pursuing the purpose for which it was established. The 1AC purports to assert causes of
action for breach of fiduciary duty against all named defendants and for injunctive relief against Dauner

DATE: 01/13/2017 MINUTE ORDER Page 1

DEPT: 54 Calendar No.
CASE TITLE: David Regan on behalf of Caring for CASE NO: 34-2016-00199120-CU-MC-GDS
Californians LLC vs. C. Duane Dauner, et al

alone, including his removal from CFC's Board of Directors.

Defendants' Moving Papers. Defendants move to compel arbitration of the claims asserted in the
present action on the grounds that they fall within the scope of the arbitration clause found in the Code
which mandates arbitration of all disputes relating to the application and interpretation of the Code and
that plaintiff, the President of UHW, is bound by the Code, including the arbitration clause. According to
the moving papers, this action is in reality a dispute between UHW and CHA over the positions taken by
the latter's representatives on CFC's Board of Directors but instead of abiding by the arbitration clause in
the Code, UHW filed suit against CHA's representatives on CFC's Board but when CHA moved to
intervene in that suit and then demanded arbitration, UHW dismissed the action and UHW's President
re-filed this substantially similar lawsuit. Defendants add that when CHA initiated its own arbitration over
a separate breach of the Code, UHW insisted on arbitrating the facts which form the basis of this suit
based on an argument that the disagreement between CHA's and UHW's representatives on the Board
excused UHW's breach of the Code, and despite an arbitration award which found the conduct of CHA's
representatives (including the defendants named in this action) to be proper, UHW now insists on
pursuing this lawsuit in an attempt to commandeer CFC and the millions of dollars in CFC's bank
Plaintiff's "Opposition." Plaintiff contends that the real party in interest here is CFC itself and since
CFC is not a signatory to any agreement which contains an arbitration clause, the present motion must
be denied. The opposition maintains that the present action is solely based on the defendant directors'
alleged breaches of their fiduciary duties to CFC, seeking damages to compensate CFC for the
expenses incurred as a result of these breaches and an injunction against defendant Dauner, with no
claims being based on or related to the Code executed by CHA and UHW. Plaintiff adds that
Defendants' reliance on the Code is misplaced since the Code expressly empowers only parties to the
agreement (i.e., CHA and CHW) to enforce it ("No Party other than the Party represented by the
signatories hereto shall have any right to bring any action under this Agreement or enforce any provision
under this Agreement" and "Neither employees nor any other person, Party, or entity of any type is
vested with any right under this agreement"). The opposition next insists that none of the claims alleged
in the 1AC depend on or relate to any provision in the Code and defendants' earlier motion to transfer
this case from Los Angeles County Superior Court asserted that this Court is the exclusive proper forum
for the case, thereby estopping them from now claiming arbitration is required.

Defendants' "Reply." In their "reply," Defendants first argue not only that plaintiff's admitted attempt to
remove defendant Dauner from CFC's Board is in violation of the Code but also that both the fiduciary
duty and injunctive relief claims raise questions relating to the "application and interpretation" of the
Code which fall squarely within the Code's arbitration clause. The reply also contends the opposition
confuses and misstates the various theories giving non-signatories the right to enforce arbitration
clauses and binding non-signatories to the same, as well as ignoring controlling legal precedent. Next,
Defendants maintain that while the present action is styled as a derivative action on behalf of CFC, the
right to bring a derivative action on behalf of a non-profit mutual benefit corporation is reserved to the
corporation's members, if any and here, CFC was deliberately structured without members. As such,
CFC is not properly characterized as a party much less the real party in interest but even if it were, this
alone does not preclude arbitration pursuant to the Code's provisions. Finally, Defendants assert that
the opposition's estoppel argument based on the earlier motion to transfer is contrary to existing
California Supreme Court precedent.
Code of Civil Procedure 1281.2 provides in pertinent part:
On petition of a party to an arbitration agreement alleging the existence of a written agreement to

DATE: 01/13/2017 MINUTE ORDER Page 2

DEPT: 54 Calendar No.
CASE TITLE: David Regan on behalf of Caring for CASE NO: 34-2016-00199120-CU-MC-GDS
Californians LLC vs. C. Duane Dauner, et al

arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall
order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to
arbitrate the controversy exists, unless it determines that:

(a) The right to compel arbitration has been waived by the petitioner; or
(b) Grounds exist for the revocation of the agreement.
(c) A party to the arbitration agreement is also a party to a pending court action or special proceeding
with a third party, arising out of the same transaction or series of related transactions and there is a
possibility of conflicting rulings on a common issue of law or fact. ...

There is no dispute plaintiff Regan signed the Code in 2014 in his capacity as President of UHW and is
one of CFC's two Co-Chairs as a result of being UHW's President in the very same way defendant
Dauner is the other Co-Chair by virtue of being the President of CHA. There is likewise no dispute that
each of the remaining director defendants named in this suit are affiliated with CHA and were designated
by Dauner as Co-Chair of CFC.

The Code executed by the presidents of UHW and CHA in 2014 contains the following provisions on
Pages 3-4 and 7, respectively:
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. ... 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. ... The Union shall not carry out or engage in any
"Anti-Employer Activities" as defined herein. ...
2. "Anti-Employer Activities" mean the following activities directed at or with respect to CHA or signatory
hospitals or health systems and any of their officers, directors, managers or shareholders: actions
commonly associated with a corporate campaign; reputation or economic attacks; personal attacks; or
instigating or supporting any of the following: litigation (with the exception of litigation to enforce the
terms of an existing collective bargaining agreement); adverse action by any branch of government; or
adverse actions by other third parties.
7. Joint Problem-Solving Procedures:
a. The Parties shall designate an Arbitrator... The designated Arbitrator shall resolve any disputes over
the application and interpretation of this Agreement. The Arbitrator shall have final and binding authority
to enforce this Agreement and resolve issues that rise during the course of this Agreement. ...
(Code, pp. 3-4, 7 (emphasis added).)

Notably, plaintiff does not argue that arbitration should be denied as a result of either Defendants
waiving their right to compel arbitration or there being grounds to revoke the Code or its arbitration
clause based on either 1281.2(a) or (b), respectively. Instead, plaintiff primarily insists that CFC is the
real party in interest and CFC is not a signatory to any agreement which includes an arbitration
provision, thereby precluding arbitration of any of the claims alleged in the 1AC but as explained below,
plaintiff's this argument lacks merit.
Department 53 of this Court has already considered and ruled on a similar petition by CHA to compel
arbitration of several disputes with UHW pursuant to the very same arbitration clause in the 2014 Code.
In Sacramento Superior Court Case No. 2016-00189567, CHA moved to compel the arbitration of
several matters including a complaint which UHW had filed in late 2015 on behalf of itself and CFC

DATE: 01/13/2017 MINUTE ORDER Page 3

DEPT: 54 Calendar No.
CASE TITLE: David Regan on behalf of Caring for CASE NO: 34-2016-00199120-CU-MC-GDS
Californians LLC vs. C. Duane Dauner, et al

against the same four CHA-affiliated directors of CFC who are named in the present action and which
contained similar allegations for not only breach of fiduciary duty and injunctive relief but also seeking
removal of Co-Chair Dauner from CFC's Board.

Although this 2015 action was voluntarily dismissed without prejudice by UHW on the very same date
CHA moved to compel arbitration (and was re-filed in the name of plaintiff Regan just a week later in Los
Angeles before being transferred to Sacramento), Department 53 ordered arbitration of the remaining
disputes and in doing so, made a number of remarks which are directly relevant to the question
presented here. They need not be cited here as Department 53's order dated 3/14/2016 is attached to
the Kirschner Declaration filed in support of this petition and this Court notes that the Third District Court
of Appeal denied UHW's petition for writ of mandate relative to Department 53's order compelling
It is true that the present action is distinguishable from the complaint which UHW itself filed in 2015
against the defendant directors inasmuch as the present action is brought solely by UHW's President but
there can be no dispute that Regan himself signed the Code containing the arbitration clause sought to
be enforced here by Defendants and did so in the capacity as President of UHW, thereby promising
UHW would not sue CHA or any of its officers, directors, managers, etc. and not "utilize surrogates to
engage in any activity not permitted..." While the 1AC does allege plaintiff Regan is bringing this action
in his capacity as a "Co-Chair and Director" of CFC, the evidence plainly reveals that he holds these
positions of "Co-Chair and Director" for no reason other than his being the current President of UHW, the
very capacity in which he executed the 2014 Code containing the arbitration clause.
Accordingly, the very question of whether his pursuit of this lawsuit in that capacity is in violation of the
Code's prohibition against "Anti-Employer Activities" is subject to the Code's broadly-worded arbitration
clause mandating that "any disputes over the application and interpretation of this Agreement" be
resolved by the arbitrator previously selected by the parties. This is particularly true since CFC itself was
formed pursuant to the Code which contains the arbitration clause sought to be enforced here and as
pointed out by Department 53 in its 3/14/2016 order, any reasonable doubt as to whether the present
suit by plaintiff Regan violates the Code's terms must be resolved via arbitration.
The Court must also reject plaintiff's suggestion that none of the parties seeking to compel arbitration
here is a signatory to the Code and therefore lacks standing to compel arbitration pursuant to the Code's
provisions. At a minimum, CHA is clearly a party to the Code and is, by virtue of its recent intervention in
this action, has standing to bring the present petition on its own behalf. Moreover, while the opposition
contends the four individual director defendants have been sued only in the capacity as directors of
CFC, the evidence now before the Court confirms that the only reason they hold these positions is by
virtue of their affiliation with CHA. Thus, to deny them the right to seek enforcement of the rights
otherwise afforded to CHA would be inconsistent with established California law holding that arbitration
agreements may be enforced by a non-signatory on a third party beneficiary theory (see, e.g., Thornton
v. Career Training Center, Inc. (2005) 128 Cal.App.4th 116) and/or the doctrine of equitable estoppel
(see, e.g., Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696
[claims asserted against non-signatory "intimately intertwined" with contract containing arbitration
clause]). Plaintiff has failed to establish that neither of these theories can be utilized in this case
especially since the individual defendants have, by virtue of bring this petition, manifested their intent to
be bound by the arbitration clause.
Finally, plaintiff's claim that defendants are estopped from enforcing the arbitration clause solely
because they argued in their earlier motion to transfer this case from Los Angeles County Superior Court
that this Court is the only proper forum for the case is without both legal and factual support.

DATE: 01/13/2017 MINUTE ORDER Page 4

DEPT: 54 Calendar No.
CASE TITLE: David Regan on behalf of Caring for CASE NO: 34-2016-00199120-CU-MC-GDS
Californians LLC vs. C. Duane Dauner, et al

In light of the foregoing, the present petition to compel arbitration and to stay all court proceedings
pending completion of arbitration is granted.

Pursuant to CRC Rule 3.1312, counsel for Defendants to prepare a formal order consistent with the
This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc.
1019.5; CRC Rule 3.1312.)

The matter was argued and submitted. The matter was taken under submission.

After taking this matter under submission, the Court hereby ARRIRMS its tentative ruling granting
defendants and intervenor's motion (petition) to compel arbitration and to stay court proceedings
pending completion of arbitration with the following additions.
Plaintiff's request for "clarification" of the Court's ruling is denied.
Plaintiff's request for a brief stay on the enforcement of this order is granted. This stay shall
automatically expire on 2/14/2017.
This minute order is effective immediately.
Pursuant to CRC Rule 3.1312, counsel for moving parties to prepare a formal order.

DATE: 01/13/2017 MINUTE ORDER Page 5

DEPT: 54 Calendar No.