Brock v. Kaiser Foundation Hospitals (10 Cal. App. 4th 1790, 1992)

Opinion

SPARKS, J.

In this case we examine the distinction between an action at law and a contractual arbitration proceeding based on the same dispute and conclude that they are independent remedies. This distinction plays a critical role in the resolution of the two questions posed by this appeal.

The first is whether an action at law stayed during the pendency of contractual arbitration proceedings may nevertheless be dismissed for failure to bring it to trial within five years under Code of Civil Procedure section 583.310 (subsequent undesignated section references are to this code). Under the governing statute, in computing the time within which an action must be brought, the time during which the action was stayed must be excluded. (§ 583.340, subd. (b).) Thus, agreeing with Byerly v. Sale (1988) 204 Cal.App.3d 1312 [251 Cal.Rptr. 749], we conclude the action may not be dismissed.

The second is whether the dismissal of the action at law automatically terminates the arbitration proceeding and, if not, whether the trial court may nevertheless dismiss the arbitration proceeding for delay in its prosecution. In agreement with dictum in Byerly and its progeny (and contrary to other holdings), we conclude that the fate of the action at law has no direct effect on the contractual arbitration proceedings. Consequently, the dismissal of the action at law does not constitute grounds to dismiss the arbitration proceedings. We further conclude that the trial court has no jurisdiction to dismiss an arbitration proceeding for failure to prosecute it in a reasonably diligent fashion. Because the trial court in the matter before us dismissed both the action at law and the pending contractual arbitration proceedings (that were the basis for staying the action at law), we shall reverse the judgment in its entirety.

Factual Background

Given our resolution of this appeal, the relevant facts are few. Michael and Beth Brock, acting individually and as guardians ad litem for their minor son, Aaron, filed this action in May 1985 against defendants Kaiser Foundation Hospitals, Permanente Medical Group, Kaiser Foundation Health Plan, Inc., and various Does. Plaintiffs’ complaint alleged the defendants had committed medical malpractice in treating Aaron. In March 1986, the parties entered into a stipulation to submit the dispute to the mandatory binding arbitration provisions contained in the contract between the defendants and what we assume is the labor union to which one or both of Aaron’s parents belong. The stipulation provided that the dispute was to be submitted to binding arbitration “pursuant to the laws of the State of California and the agreement entered into between Kaiser Foundation Health Plan, Inc., Northern California Region and Group 7443, AT&T Technologies.” The parties also agreed the action at law was to be stayed pending completion of the arbitration proceedings. The court entered an order in April 1986 enforcing this stipulation by submitting the dispute to arbitration and by staying the action at law.

In May 1991, the plaintiffs moved to compel further answers to interrogatories and for sanctions. The defendants responded with a motion to dismiss both the action at law and the arbitration proceedings on the ground more than five years had elapsed since the complaint had been filed and the matter ordered into arbitration. In their moving papers, defendants asserted that the contract governing the arbitration contained a clause requiring reasonable diligence in the pursuit of the arbitration claim. It provided in relevant part that “[a] claim shall be waived and forever barred if. . .the Claimant fails to pursue the arbitration claim in accordance with the procedures described herein with reasonable diligence.” Citing Preston v. Kaiser Foundation Hospitals (1981) 126 Cal.App.3d 402 [178 Cal.Rptr. 882], and Lockhart Mummery v. Kaiser Foundation Hospitals (1980) 103 Cal.App.3d 891 [178 Cal.Rptr. 882], defendants argued “[i]t is clear from the pleadings that this case was not brought to trial within five years after the action was commenced. It is equally clear from the facts set forth in the supporting declaration of [counsel] that claimant[s] did not pursue arbitration with reasonable diligence. More than five years have elapsed since this matter was ordered into arbitration on April 15, 1986.”

The court granted the motion, ruling, “The five year statute applies. Preston v. Kaiser Foundation Hospitals (1981) 126 Cal.App.3d 402, 409. There is no basis for a finding of impract[ic]ability or impossibility.” The court subsequently entered a judgment purporting to dismiss both the complaint and the arbitration proceedings. This appeal followed.

Discussion

On appeal plaintiffs advance three arguments. First, they contend the complaint should not have been dismissed because the trial court’s jurisdiction was suspended pending the arbitration and no arbitration had yet taken place. Next, they argue the trial court was absolutely barred from entering a dismissal by virtue of section 1141.17. Finally, they assert their responsive pleadings to the motion to dismiss met the criteria for the impracticability and/or futility exceptions to the five-year statute.

I

Contractual Arbitration

What has been variously denominated as “general,” “voluntary," “nonjudicial," or “contractual” arbitration has explicit statutory sanction in California. “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (§ 1281.) A party to a contractual arbitration agreement may compel a recalcitrant party to comply with a valid agreement by means of a petition pursuant to section 1281.2, which is in essence a suit in equity to compel specific performance of the arbitration agreement. (Atlas Plastering, Inc. v. Superior Court (1977) 72 Cal.App.3d 63, 69 [140 Cal.Rptr. 59].)

But as this court recognized long ago, contractual arbitration is in no sense a “trial of a cause before a judicial tribunal,” nor is it a usurpation or ouster of the judicial power vested in the trial court of this state by our Constitution. (Snyder v. Superior Court (1937) 24 Cal.App.2d 263, 267 [74 P.2d 782].) As a result, there is nothing to prevent one of the parties to a contractual arbitration provision from resorting initially to an action at law. (Spence v. Omnibus Industries (1975) 44 Cal.App.3d 970, 975 [119 Cal.Rptr. 171]; Ross v. Blanchard (1967) 251 Cal.App.2d 739, 742-743 [59 Cal.Rptr. 783].) The other party, if determined to pursue arbitration, must then take action to compel arbitration. (Spence, supra, 44 Cal.App.3d at p. 975.) “A right to compel arbitration is not . . . self-executing. If a party wishes to compel arbitration, he must take active and decided steps to secure that right, and is required to go to the court where the [other party]’s action [at law] lies.” (Gunderson v. Superior Court (1975) 46 Cal.App.3d 138, 143 [120 Cal.Rptr. 35].) Consequently, the party seeking to enforce the contractual arbitration clause must file the section 1281.2 petition in the action at law (or raise it as an affirmative defense in the answer) or else the right to contractual arbitration is waived. (Id. at p. 144; Kustom Kraft Homes, supra, 14 Cal.App.3d at p. 811; see also § 1281.5.) The party seeking resolution via contractual arbitration must also file a motion in the action at law to stay it (§§ 1281.4, 1292.8); it will not be stayed automatically. (Ross, supra, 251 Cal.App.2d at p. 742.) This assertion of a contractual arbitration agreement constitutes a “plea in abatement” of the action at law. (Gunderson, supra, 46 Cal.App.3d at p. 144; Kustom Kraft Homes, supra, 14 Cal.App.3d at p. 811.)

Once a court grants the petition to compel arbitration and stays the action at law, the action at law sits in the twilight zone of abatement with the trial court retaining merely a vestigial jurisdiction over matters submitted to arbitration. This vestigial jurisdiction over the action at law consists solely of making the determination, upon conclusion of the arbitration proceedings, of whether there was an award on the merits (in which case the action at law should be dismissed because of the res judicata effects of the arbitration award [Division of Labor Standards Enforcement v. Williams (1981) 121 Cal.App.3d 302, 309 [175 Cal.Rptr. 347]; Rest.2d Judgments, § 84]) or not (at which point the action at law may resume to determine the rights of the parties). (Cf. Lord v. Garland (1946) 27 Cal.2d 840, 851 [168 P.2d 5]; Shuffer v. Board of Trustees (1977) 67 Cal.App.3d 208, 217 [136 Cal.Rptr. 527] [discussing effect of interlocutory judgment pursuant to § 597 abating second action at law pending resolution of first action of law].) The court also retains a separate, limited jurisdiction over the contractual arbitration which was the subject of the section 1281.2 petition: “After a petition has been filed under this title [i.e., ‘title 9’ (§§ 1280-1294.2)], the court in which such petition was filed retains jurisdiction to determine any subsequent petition involving the same agreement to arbitrate and the same controversy, and any such subsequent petition shall be filed in the same proceeding.” (§ 1292.6 [italics added].)

As this short exegesis should demonstrate, at the time the instant defendants moved to dismiss, there were two separate proceedings over which the trial court had separate fonts of jurisdiction. Therefore, we must determine the propriety of each dismissal separately.

II

The Action at Law

A.

Under section 583.310, “[a]n action shall be brought to trial within five years after the action is commenced against the defendant.” If a plaintiff does not comply within this five-year requirement, the action “shall be dismissed by the court on its own motion or on motion of the defendant . . . (§ 583.360, subd. (a).) In computing the five-year period, “there shall be excluded the time during which any of the following conditions existed: [ft] . . . [ft] (b) Prosecution or trial of the action was stayed or enjoined, [ft] (c) Bringing the action to trial, for any other reason, was impossible, impracticable, or futile.” (§ 583.340.) These statutes directly apply only to actions at law and are enforced by the trial court. (Young v. Ross-Loos Medical Group, Inc. (1982) 135 Cal.App.3d 669, 673 [185 Cal.Rptr. 536] [former § 583].) We turn, then, to cases applying these principles in the context of an action at law stayed pending contractual arbitration.

B.

1.

In Byerly v. Sale, supra, 204 Cal.App.3d 1312, the court succinctly concluded in one paragraph that because a stay pending arbitration had been in effect for almost the entire life of the action at law filed by a party to the arbitration agreement, it was impossible for the plaintiff to proceed. Consequently, the five-year period had not even remotely expired, so it was improper to dismiss the complaint. (204 Cal.App.3d at p. 1314.) Were Byerly the sole published authority, we could simply cite its admirably brief resolution of the issue. Unfortunately, there is other authority which we feel must first be discussed; since these cases generally fail to recognize the distinction between a trial court’s jurisdiction over an action at law and the related contractual arbitration proceeding, we must parse their analyses as best we can between the two separate parts of our discussion.

2.

In Lockhart-Mummery v. Kaiser Foundation Hospitals, supra, 103 Cal.App.3d 891, the plaintiff had filed what apparently was a malpractice action. The defendant obtained an order to arbitrate pursuant to a contract between the parties (which presumably is similar to the contract between the parties before us); the court also stayed the action at law. (Id. at p. 893.) The plaintiff failed to prosecute the arbitration proceedings diligently. The defendant moved (apparently in the trial court) to dismiss, but was rebuffed without prejudice. Later, after a neutral arbitrator was at last chosen, the defendant requested dismissal of the arbitration proceedings and was advised by the arbitrator to make a motion in the trial court. Upon such a motion, the trial court dismissed the action at law and the arbitration proceeding. (Id. at pp. 893-894.)

Putting its substantive cart before its jurisdictional horse, the appellate court first upheld the propriety of dismissal. Without acknowledging the separate status of the action at law from the arbitration proceeding, the court concluded that the five-year period to bring an action to trial, while not directly applicable to arbitration proceedings, was nevertheless an appropriate criterion for determining whether a party to an arbitration had violated a contractual provision to prosecute the arbitration with “reasonable diligence.” (103 Cal.App.3d at pp. 895-896.) The relevance of this analysis to the issue of dismissing the action at law for failure to prosecute the action at law within five years is unclear, but the court concluded that as more than five years had elapsed from the date the plaintiff had filed the complaint, “the complaint should be dismissed under [the former version of section 583.360].” (Id. at p. 896.)

As for any exclusions from the five-year period, the court first found the order for arbitration (more properly, the stay pending arbitration, since without the stay the action at law could have proceeded) was of no significance, analogizing to “judicial arbitration” (§ 1141.10 et seq.). (Lockhart-Mummery, supra, 103 Cal.App.3d at p. 896.) However, this is an inappropriate analogy, because (as earlier noted) “judicial” arbitration is a mutually exclusive scheme that is not comparable to contractual arbitration. (Nanfito v. Superior Court, supra, 2 Cal.App.4th 315, 319; Porreco v. Red Top RV Center (1989) 216 Cal.App.3d 113, 118-120 & fn. 6 [264 Cal.Rptr. 609].) The Lockhart-Mummery court rejected the plaintiff’s argument that the stay on the action at law pending arbitration prevented the five-year period from running, citing the plaintiff’s failure to exercise reasonable diligence. (103 Cal.App.3d at p. 897.)

We disagree that application of the stay exclusion to an action at law depends on the reasonable diligence of the plaintiff in the related arbitration proceedings. First of all, Lockhart-Mummery was decided before the enactment of subdivision (b) of section 583.340, which expressly excludes the time when prosecution of the case was stayed. Moreover, with the exception of Lockhart-Mummery, we have found no other case imposing a “reasonable diligence” prerequisite for application of the stay exclusion (§ 583.340, subd. (b)). It might be argued that since the stay exclusion developed out of the catchall exclusion, the “reasonable diligence” requirement should be imported as well. However, this would render superfluous the separate codification of the stay exclusion. Moreover, “reasonable diligence” is not a concept that has any pertinence to a plaintiff who is prevented from pursuing an action at law by an arbitration stay. The stay for all intents and purposes prevents the plaintiff from ever again pursuing the action at law by virtue of the claim-preclusive effect of the arbitration (unless the arbitration concludes without resolving the merits of the dispute); thus, a plaintiff diligently advancing an arbitration proceeding only brings the action at law closer to dismissal, not trial. A stay on proceedings consequently stays the five-year period until such time as it is no longer in abeyance. We therefore conclude that to the extent Lockhart-Mummery is apposite, it is unpersuasive.

3.

Of tangential relevance is Preston v. Kaiser Foundation Hospitals, supra, 126 Cal.App.3d 402, cited by the trial court. There the plaintiffs filed a medical malpractice action which was subsequently stayed pending contractual arbitration pursuant to an order of the trial court. (Id. at pp. 405-406.) The trial court apparently dismissed the action at law strictly on the basis that more than five years had elapsed from its initiation. (Id. at p. 410.) The Preston court’s entire analysis is skewed by its erroneous conclusion that “[t]he effect of the dismissal [of the action at law] was to vacate the order for arbitration and terminate the arbitration itself.” (Id. at p. 406.) Having thus admixed the separate proceedings, the court agreed with Lockhart-Mummery that the five-year period should be the criterion for measuring a plaintiff’s reasonable diligence in prosecuting an arbitration proceeding; concluded the five years should not run from the filing date of the complaint but from the filing date of the order to arbitrate because the plaintiff could not begin the process of arbitration until then; and remanded to the trial court to reconsider its order in light of these principles. (126 Cal.App.3d at pp. 406-410.) Since Preston does not explicitly consider the effect of an arbitration stay on the five-year period, it is not apposite on the issue.

4.

Boutwell v. Kaiser Foundation Health Plan (1988) 206 Cal.App.3d 1371 [254 Cal.Rptr. 173], once again involves a complaint for medical malpractice, this time with a stipulation to stay the proceedings pending arbitration pursuant to the contract between the parties. (Id. at p. 1373.) More than six years later, the defendants successfully moved to dismiss the action at law for failure to bring it to trial within five years. (Id. at p. 1374.) The reviewing court concluded the catchall exclusion from the five-year period was not applicable because the plaintiff had not exercised reasonable diligence in pursuing the arbitration proceeding. (Id. at pp. 1374-1375.) The court failed to mention the effect of the stay under subdivision (b) of section 583.340. The court expressed no opinion regarding the effect of dismissing the complaint on the arbitration proceedings. (206 Cal.App.3d at p. 1375.)

As we stated with respect to Lockhart-Mummery, reasonable diligence in arbitration proceedings has no bearing on the action at law stayed pending those proceedings; the stay on proceedings stays the five-year period as well until the conclusion of the arbitration proceedings. We therefore disagree with Boutwell on this issue as well.

5.

This leaves Kuzmanoff v. Kron (1988) 207 Cal.App.3d Supp. 1 [255 Cal.Rptr. 168]. There, the plaintiff filed the action at law in 1983. The parties contractually agreed to arbitrate the dispute in 1987. In 1988, the defendants moved to dismiss the action. (Id. at pp. Supp. 2-3.) Applying no analysis other than to cite Preston and Lockhart-Mummery, the appellate department of the superior court affirmed the dismissal of the action. Since we have found neither case persuasive or apposite, we must also part company with Kuzmanoff in this regard.

C.

Having found nothing persuasive in the other opinions touching upon this issue, we readily concur in the conclusion of the Byerly court. It was therefore error for the trial court to dismiss the plaintiffs’ complaint. Their legal action was stayed during the arbitration proceedings and thus the time during that stay should have been excluded for purposes of computing the five-year period. (§ 583.340, subd. (b).) Since the five-year period to bring the case to trial had not expired, it was erroneous to dismiss the action for delay in prosecution under the mandatory statute. (§ 583.360, subd. (a).)

Ill

Trial Court Jurisdiction Over Contractual Arbitration Proceedings

Since the trial court’s order also purported to dismiss the arbitration proceedings, we must additionally address the issue of a trial court’s authority to terminate contractual arbitration proceedings. A line of cases exists which purports to stand for the proposition that a trial court has authority to dismiss contractual arbitration proceedings. Counterpoised are suggestions in other cases (including dictum in Byerly) that contractual arbitration proceedings have a life of their own regardless of whether an action at law based on the same controversy is dismissed. As shall be seen, the former line does not withstand close analysis.

A.

1.

Kaplan v. Eldorado Ins. Co. (1976) 55 Cal.App.3d 587 [127 Cal.Rptr. 699] is the seed from which has grown a tangled vine of decisions regarding the authority of a trial court to step into contractual arbitration agreements and terminate them. In Kaplan, the jurisdiction of the trial court was invoked (apparently pursuant to § 1281.6) by means of a petition to appoint a neutral arbitrator in an ongoing contractual arbitration proceeding relating to a personal injury controversy. (55 Cal.App.3d at p. 588.) The plaintiff thereafter disregarded numerous orders of the trial court compelling him to comply with discovery requests, including his deposition and physical examination. (Id. at pp. 589-590.) The defendants successfully moved for sanctions and for dismissal of the arbitration proceedings pursuant to former section 2034. (55 Cal.App.3d at p. 590.)

The opinion discusses the substantive propriety of the trial court’s action pursuant to the discovery statutes without making explicit the basis for the trial court’s authority to do so in the context of a contractual arbitration proceeding. (Kaplan, supra, 55 Cal.App.3d at pp. 591-593.) However, it appears that the trial court lacked authority to order and enforce discovery in the arbitration proceedings.

The Civil Discovery Act of 1986 (§§ 2016-2036) authorizes, as did its predecessor, various types of discovery in a pending “action.” (§ 2017, subd. (a).) The term “ ‘Action’ includes a civil action and a special proceeding of a civil nature.” (§ 2016, subd. (b).) But arbitration, it has been held, is not a “special proceeding” within the meaning of the Civil Discovery Act. As the court ruled in McRae v. Superior Court (1963) 221 Cal.App.2d 166 [34 Cal.Rptr. 346], “arbitration itself is not a ‘special proceeding’ as contemplated by the provisions of the Code of Civil Procedure relating to depositions.” (Id. at p. 170 [construing § 2016, former subd. (a)].) Indeed, court-ordered discovery in arbitration proceedings would defeat the very purpose of arbitration. “When it has been determined that arbitration should be pursued and all judicial proceedings have been suspended until completion of the arbitration, it would be wholly incompatible with established policies of the law to permit the court thereafter to intervene in, and necessarily interfere with, the arbitration ordered. In large measure, it not only would preclude the parties from obtaining ‘an adjustment of their differences by a tribunal of their own choosing,’ but it also would recreate the very ‘delays incident to a civil action’ that the arbitration agreement was designed to avoid.” (Id. at p. 171.) In short, “the provisions of the new discovery law are not applicable to [contractual] arbitration.” (2 Civil Discovery Practice in Cal. (Cont.Ed.Bar 1988) Key Discovery Principles, § 13.22, p. 833.) Only arbitrators can order discovery in the arbitration proceedings.

As we shall see, the failure of the Kaplan court to note these restrictions on court-ordered discovery in arbitration proceedings had unforeseen consequences.

2.

We return to Lockhart-Mummery, supra, 103 Cal.App.3d 891. Having decided the trial court acted correctly, the court turned to the question of the trial court’s jurisdiction to dismiss both the action at law and the arbitration proceeding. Citing Kaplan, the Lockhart-Mummery court reasoned that if “the courts have jurisdiction to dismiss for refusal of discovery it [stc] also should be empowered to dismiss where there has been no exercise of reasonable diligence by appellant. To hold otherwise, would place a defendant in an untenable position as it would be unable, without the appointment of appellant’s arbitrator,[] to move the litigation along nor could it seek dismissal despite the passage of three years of inaction. [