Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. BC355791, Maureen Duffy-Lewis, Judge.
Seyfarth Shaw, David D. Kadue and Holger G. Besch for Defendants and Appellants.
Charles T. Matthews & Associates and Charles T. Matthews; The Rager Law Firm and Jeffrey A. Rager; Law Offices of Roxanne Huddleston and Roxanne Huddleston for Plaintiff and Respondent.
CHAVEZ, J.
Defendants and appellants Southern California Permanente Medical Group (the Medical Group) and Kaiser Foundation Health Plan, Inc. (Kaiser) (the Medical Group and Kaiser are referred to collectively as defendants) appeal from the trial court’s order denying their petition to compel arbitration of an action filed by plaintiff and respondent Mark L. Woods, M.D. (plaintiff). We affirm the trial court’s order.
BACKGROUND
The Medical Group is a partnership of physicians providing medical services to persons who are members of Kaiser. Plaintiff began working for defendants as an emergency room physician in October 1990. He became a partner of the Medical Group in 1992.
1. The Partnership Agreement
The Medical Group’s partnership agreement authorizes a board of directors to adopt operating rules and regulations. Article 7 of the partnership agreement provides in part: “Operational Rules and Regulations adopted by the Board of Directors will govern the conduct of the business of the partnership and establish working conditions including, but not limited to, Educational Leave, Vacation time, and Leaves of Absence. Amendments to the Operational Rules and Regulations may be made by one of the two following methods: [¶] By the Board of Directors. [¶] Upon the petition (setting forth the text of the proposed amendment) of 50 percent or more of the active partners, an election will be held. Such petition will not be valid unless signatures are obtained within 120 days following commencement of the circulation of the petition. The amendment will be approved if, in the election, a majority of the total active partners vote in favor of the amendment.”
2. Rules and Regulations
The rules and regulations adopted by the Medical Group’s board of directors consist of approximately 160 pages of procedures governing a variety of matters, including election and termination of partners, duties of the board of directors, physician work schedules, compensation, benefits, leave and vacation time. Sections 1.I and 1.J of the rules and regulations contain a dispute resolution procedure. Prior to May 2006, the dispute resolution procedure required binding arbitration of any claim by a physician that the Medical Group “acted in a manner that adversely affected the Complaining Physician’s rights and/or interests.”
The board of directors amended the dispute resolution procedure in May 2006.
3. The Retaliation Action
In March 2004, plaintiff filed an action against defendants (the retaliation action) in which he alleged that defendants had retaliated against him by placing him on administrative leave and reducing his pay after he complained about inadequate patient care at the Kaiser facility in Bellflower, California. Defendants moved to compel arbitration of the retaliation action pursuant to the dispute resolution procedure set forth in the Medical Group’s operating rules and regulations. The trial court denied the motion on the ground that the arbitration provision was unconscionable because it was unilateral -- requiring physicians, but not the Medical Group, to arbitrate their disputes.
The retaliation action proceeded to trial. On June 2, 2006, the jury returned a verdict in plaintiff’s favor and awarded him $200,000 in back pay.
4. The Amended Dispute Resolution Procedures
On May 18, 2006, the Medical Group’s board of directors amended its rules and regulations to make the dispute resolution procedure applicable to both the Medical Group and its physicians. The board of directors also amended section 1 of the rules and regulations to include the following language: “All partners are required to sign this DRP. All partners and Associates are bound to follow the Rules and Regulations, whether or not they specifically indicate their agreement to do so. [¶] Partners will sign the following statement: [¶] I have received a copy of the Dispute Resolution Procedure and have read it. I agree to abide by the Dispute Resolution Procedure and by any changes made to it from time to time by the Board of Directors.” Signature blanks for the physician’s name and signature appear immediately below that statement.
5. The Instant Wrongful Termination Action
On April 17, 2006, while plaintiff’s retaliation action was still pending, defendants again placed plaintiff on administrative leave. On June 1, 2006, the Medical Group’s board of directors voted to terminate plaintiff’s employment, and plaintiff was discharged on July 19, 2006. Plaintiff commenced this wrongful termination action on July 21, 2006.
Defendants moved to compel arbitration of plaintiff’s claims pursuant to the amended disputed resolution procedure adopted in May 2006. Defendants’ motion was supported by the declaration of Jeffrey Selevan, M.D., the Medical Group’s director of business management. In his declaration, Dr. Selevan stated that plaintiff was a partner of the Medical Group, that plaintiff’s relationship with the Medical Group was governed by the partnership agreement and the rules and regulations promulgated by the board of directors, and that plaintiff’s claims were subject to arbitration pursuant to the amended dispute resolution procedure. Dr. Selevan further stated that the Medical Group had circulated the amended dispute resolution procedures to all partners by email on May 29, 2006, and mailed a copy to all partners June 23, 2006.
Plaintiff opposed defendants’ motion, arguing that no valid agreement to arbitrate had been formed because he never consented to arbitration. Plaintiff’s opposition was supported by his own declaration, in which he denied receiving the amended dispute resolution procedure by mail or by email. Plaintiff produced an email dated November 1, 2006, circulating the amended dispute resolution procedure to the Medical Group’s physicians and asking them to sign and return, by November 30, 2006, an acknowledgment of receipt and an agreement to abide by the amended dispute resolution procedure. Plaintiff stated in his declaration that he never signed the agreement to abide by the amended dispute resolution procedure. As further support for his opposition, plaintiff provided deposition testimony by Dr. Selevan, admitting that he had no proof that plaintiff had ever received the amended disputed resolution procedure. Plaintiff also provided deposition testimony of Medical Group physician Dr. David Quam, who said that he himself did not receive the amended dispute resolution procedure until late 2006, and that he had never seen a copy of the amended procedure signed by plaintiff.
After hearing argument from the parties, the trial court denied the motion to compel arbitration. Defendants appeal from the order denying that motion.
DISCUSSION
I. Applicable Law and Standard of Review
“The right to arbitration depends on a contract. [Citations.] Accordingly, a party can be compelled to submit a dispute to arbitration only where he has agreed in writing to do so. [Citation.]” (Boys Club of San Fernando Valley, Inc. v. Fidelity & Deposit Co. (1992) 6 Cal.App.4th 1266, 1271, fn. omitted.) In a motion to compel arbitration, “[t]he petitioner bears the burden of proving the existence of a valid arbitration agreement by the preponderance of the evidence, and a party opposing the petition bears the burden of proving by a preponderance of the evidence any fact necessary to its defense. [Citation.]” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 (Engalla).)
When adjudicating a motion to compel arbitration, “the trial court sits as a trier of fact, weighing all the affidavits, declarations, and other documentary evidence, as well as oral testimony received at the court’s discretion, to reach a final determination. [Citation.]” (Engalla, supra, 15 Cal.4th at p. 972.) A reviewing court will uphold the trial court’s resolution of disputed facts if supported by substantial evidence. When there is no disputed extrinsic evidence considered by the trial court, its decision concerning arbitrability is reviewed de novo. (Nyulassy v. Lockheed Martin Corp. (2004) 120 Cal.App.4th 1267, 1277.)
II. Existence of Agreement to Arbitrate
“California contract law applies to determine whether the parties formed a valid agreement to arbitrate. [Citations.]” (Mitri v. Arnel Management Co. (2007) 157 Cal.App.4th 1164, 1170.) “Section 1550, subdivision 2, of the Civil Code establishes the rule that an essential component to a contract is the consent of the parties to the contract. [Citation.] Civil Code section 1565, subdivision 3 provides, ‘[t]he consent of the parties to a contract must be . . . [¶] . . . [¶] . . . [c]ommunicated by each to the other.’ [Citations.]” (Id. at p. 1170.)
A. Communication of Consent
The Medical Group’s rules and regulations specify the manner in which partners must communicate their consent to arbitrate disputes. The amended dispute resolution procedure states: “All partners are required to sign this DRP.” The amended procedure further states: “Partners will sign the following statement: [¶] I have received a copy of the Dispute Resolution Procedure and have read it. I agree to abide by the Dispute Resolution Procedure and by any changes to it from time to time by the [Medical Group’s] Board of Directors.”
There is no evidence that plaintiff signed the agreement to abide by the dispute resolution procedure. “‘It is essential to the existence of every contract that there should be a reciprocal assent to a definite proposition, and when the parties to a proposed contract have themselves fixed the manner in which their assent is to be manifested, an assent thereto, in any other or different mode, will not be presumed.’ [[Citation.], italics added.]” (Banner Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 359.) Here, the Medical Group’s board of directors specified the manner in which partners were to manifest their consent to arbitrate disputes. There is no evidence that plaintiff consented to arbitration or that he communicated his consent to defendants.
B. Incorporation by Reference
Defendants contend that plaintiff need not have signed the amended dispute resolution procedure in order to be bound by its terms because he is a party to the Medical Group’s partnership agreement, and Article 7 of that agreement incorporates rules and regulations adopted by the board of directors, including the dispute resolution procedure. Defendants further contend that plaintiff need not have expressly consented to be bound by the amended dispute resolution procedure because Article 7 of the partnership agreement authorizes the board of directors to amend the rules and regulations, and the board properly exercised its authority to do so by amending the dispute resolution procedure in May 2006.
“‘It is, of course, the law that the parties may validly incorporate by reference into their contract the terms of some other document. [Citations.]’” (Williams Const. Co. v. Standard-Pacific Corp. (1967) 254 Cal.App.2d 442, 454.) Thus, “an agreement need not expressly provide for arbitration, but may do so in a secondary document which is incorporated by reference.” (Chan v. Drexel Burnham Lambert, Inc. (1986) 178 Cal.App.3d 632, 639 (Chan), citing King v. Larsen Realty, Inc. (1981) 121 Cal.App.3d 349, 357 (King).) For the terms of another document to be incorporated by reference into a contract, “‘the reference must be clear and unequivocal, the reference must be called to the attention of the other party and he must consent thereto, and the terms of the incorporated document must be known or easily available to the contracting parties.’” (Williams Const. Co., supra, 254 Cal.App.2d at p. 454; accord King, supra, at p. 357.) Defendants failed to establish that this standard was met.
1. Clear and Unequivocal Reference
Article 7 of the partnership agreement delineates the scope of the parties’ agreement concerning the rules and regulations promulgated by the Medical Group’s board of directors. The plain language of that provision limits application of the rules and regulations to those that “govern the conduct of the business of the partnership” and “establish working conditions.” Article seven does not state that the rules and regulations govern all aspects of a partner’s relationship with the partnership. It does not mention arbitration or dispute resolution, nor is dispute resolution mentioned in any other provision of the partnership agreement.
As discussed, Article 7 of the partnership agreement states in part: “Operational Rules and Regulations adopted by the Board of Directors will govern the conduct of the business of the partnership and establish working conditions, including, but not limited to, Educational Leave, Vacation time, and Leaves of Absence. Amendments to the Operational Rules and Regulations may be made by . . . [¶] . . . the Board of Directors.”
Defendants argue that plaintiff should be compelled to arbitrate his claims because he knew of the dispute resolution procedure at the time he commenced this action, having successfully avoided its enforcement in the retaliation action. “But it is not simply the party’s awareness of the other document that is required. To impliedly incorporate an external document by reference, the subject document must contain some clear and unequivocal reference to the fact that the terms of the external document are incorporated.” (Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1608.) The partnership agreement does not clearly and unequivocally refer to all of the rules and regulations. The reference is limited to those terms that “govern the conduct of the business of the partnership” or that “establish working conditions.”
2. Consent
The partnership agreement contains no express agreement by plaintiff or any of the partners to be bound by the rules and regulations or the dispute resolution procedure contained in those regulations. The instant case is thus factually distinguishable from cases in which courts have enforced an arbitration provision in a document incorporated by reference in the parties’ contract because the parties expressly agreed to be bound by the terms and conditions of the incorporated document. (See, e.g., Slaught v. Bencomo Roofing Co. (1994) 25 Cal.App.4th 744, 748-749 [subcontract provision stated that “‘Subcontractor shall be bound by all of the terms and conditions [of general contractor’s agreement with the property owner], and shall strictly comply therewith’”]; King, supra, 121 Cal.App.3d at p. 353 [application signed by appellants required them to abide by clearly identifiable “bylaws of the Paso Robles Board of Realtors”]; Muh v. Newberger, Loeb & Co. (9th Cir. 1976) 540 F.2d 970, 972 [plaintiff agreed “to be governed by the Constitution and Rules of the Board of Governors of the [NYSE]”].) Article 7 of the partnership agreement contains no agreement by plaintiff, or any of the partners, to be bound by the rules and regulations.
Defendants failed to establish the existence of a valid agreement to arbitrate.
In view of our holding, we need not address the parties’ arguments as to whether the arbitration provision was unconscionable or so incomplete as to be unenforceable.
DISPOSITION
The order denying the petition to compel arbitration is affirmed. Respondent is awarded his costs on appeal.
We concur: BOREN, P. J., ASHMANN-GERST, J.