SUPERIOR COURT OF CALIFORNIA,

COUNTY OF SACRAMENTO
GORDON D SCHABER COURTHOUSE
MINUTE ORDER
DATE: 11/18/2016

TIME: 09:00:00 AM
JUDICIAL OFFICER PRESIDING: Raymond Cadei
CLERK: D. Ahee
REPORTER/ERM:
BAILIFF/COURT ATTENDANT: M. Oreschak

DEPT: 54

CASE NO: 34-2016-00189567-CU-PT-GDS CASE INIT.DATE: 01/26/2016

CASE TITLE: California Hospital Association vs. SEIU United Healthcare Workers West
CASE CATEGORY: Civil - Unlimited

EVENT TYPE: Motion - Other - Civil Law and Motion

APPEARANCES
Nature of Proceeding: Petition to Compel Arbitration
TENTATIVE RULING
Petitioner California Hospital Association's ("CHA") Petition to Compel Arbitration is ruled upon as
follows.
CHA seeks an order compelling arbitration before Arbitrator Richard Ahearn of its complaint against
Respondent SEIU, United Healthcare Workers - West ("UHW") pursuant to the parties' written
agreement.
Background
In May 2014, CHA, UHW and others, entered into an agreement entitled the Code of Conduct
("Agreement"). The parties agreed a "designated Arbitrator [would] resolve any disputes over the
application and interpretation of this Agreement" and that "[t]he Arbitrator [would] have final and binding
authority to enforce this Agreement and resolve issues that rise during the course of this Agreement"
(Blanchard-Saiger DecL, Ex. A, III(B).) Richard Ahearn was selected as the Arbitrator of disputes
under the Agreement. (Id. 3.)
Pursuant to the Agreement, the parties agreed "to establish an industry-wide Labor Management
Cooperation Committee (the 'Committee')." (Id., Ex. A, II(A).) The "hospitals and health systems shall
designate the Chief Executive Officer ('CEO') of CHA as their representative on the Committee; the
Union shall designate the President of the Union as its representative on the Committee .... The
Committee shall not advance any agenda without the approval of the CEO of CHA and the President of
the Union." (Id. 11(A)(1).)
The parties formed the Committee, known as Caring for Californians ("CFC"), a Labor Management
Committee. CFC was incorporated and organized as a nonprofit mutual benefit corporation under
California's Nonprofit Mutual Benefit Corporation Law. (Id., Ex. B.) The parties would jointly fund CFC,
and agreed that, "[i]n the event this Agreement terminates ... prior to the expenditure of the Committee

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funds, unencumbered funds shall be distributed back to the parties in proportion to contributions made to
the Committee." (Id. 11 (A)(3).) UHW and CHA agreed to fund CFC with an initial $50 million
contribution, to be paid 80% by CHA and 20% by UHW. (Id., 8 & Exs. A, E.)
CFC's bylaws provide that "[t]he President of CHA, or whoever may succeed him or her as chief
executive officer of CHA shall serve as Co-Chair [of CFC's Board of Directors] by virtue of his/her
position." (Id. Ex. G, Art. IV, 3.) CHA was also given the right designate three additional directors, each
a "CHA Director." (Id.) The Bylaws also allocated four directors ta UHW ("UHW Directors"), including
establishing the President of UHW as the other Co-Chair. (Id.) The Bylaws require that all acts of the
Board be "approved by both Chairs plus at least two of the other CHA Directors and two of the other
SEIU-UHW Directors." (Id. Art. IV, 11.)
In December 2015, the Agreement terminated pursuant to its terms, and CFC has had no ongoing work.
The CFC continues to spend approximately $40,000 per month on operating expenses. CHA has
requested that UHW agree to redistribute the unencumbered CFC funds, but UHW has refused. As of
September 2016, CFC has approximately $34 million in its accounts that is not currently encumbered,
thus $27.2 million would be returned to CHA and $6.87 million would be returned to UHW.
CHA's arbitration complaint alleges that UHW breached the Agreement by refusing to agree to the return
of the unencumbered funds. CHA's complaint apparently seeks an "order compelling UHW to agree to
the redistribution of funds, or, in lieu of UHW's agreement, an order directing the redistribution of the
funds." (Id., Ex. H.) The Court notes that CHA did not submit a copy of its arbitration complaint, but
rather an email from CHA giving notice to UHW of its complaint. The above-cited language is derived
from the email. (Id., Ex. H.)
Analysis
CCP 1281.2 provides, in part, that "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."
Here, there is no dispute that a valid arbitration agreement exists between CHA and UHW.
UHW opposes the Petition. UHW claims that CHA failed to join CFC, which UHW insists is an
indispensable party because the arbitrator's decision "would determine entitlement to the funds held by
CFC and the duties and obligations of CFC's directors to disburse those funds." (Opposition, 4:10-12.)
UHW further claims that the instant dispute is not between CHA and UHW, but with the individual
members of CFC's Board (who are not signatories to the arbitration agreement), therefore the arbitration
provision does not apply.
The Court asked both parties to submit additional briefing on the issue of whether the trial court or
arbitrator makes the determination as to whether an unjoined party is an indispensable party. The Court
notes that CCP 1281.2 does not identify the failure to join an indispensable party as a reason for the
Court to deny a petition to compel arbitration.

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The Court has reviewed the supplemental briefs by both parties and is more persuaded by CHA's case
authority and arguments. Specifically, that the indispensable party issue need not be determined here
because the arbitrator may frame an appropriate order only affecting UHW and CHA, but not CFC. To
the extent the arbitrator's decision exceeds his authority, UHW has the opportunity to move to vacate or
modify the order. The Court will not speculate as to how the arbitrator may frame his decision.
The Court finds a Third District Court of Appeal decision, Carpenters 46 Northern California Counties
Conference Board v. Ed Zwieigle (1982) 130 Cal.App.3d 337 ("Carpenters 46"), particularly instructive
and persuasive. In Carpenter, defendant Ed Zweigle ("Zwiegle") appealed from a judgment which ruled
that both he and Ed Zweigle, Inc., were bound by the 1974-1977 and 1977-1980 Carpenters 46 Northern
California Counties Master Agreements and which confirmed and ordered him to comply with an
arbitration award against him "operating as J.E.S. Construction Co." Zweigle argued that the judgment
could not stand since both Ed Zweigle, Inc., and J.E.S. Construction Co., Inc., were indispensable
parties which were not joined in the proceeding which affected them.
Zweigle was a licensed general building contractor that entered into an MOU with Carpenters 46 in
which he agreed to comply with certain wages, hours and working conditions. It was later discovered
that Zweigle was working on a construction project with nonunion carpenters in which J.E.S.
Construction Co. was the general contractor. J.E.S. Construction Co. appeared to be Zwiegle's alter
ego. The arbitrator ordered "[Zwiegle] 'operating as J.E.S. Construction Company' to 'cease and desist
from further violations of the Master Agreement,' to 'submit to audit of its payroll and other records to
determine whether and to what extent [he had] failed to comply,' and to make restitution of wages and
benefits resulting from [such] failure . . .' The arbitrator also reserved jurisdiction 'to resolve any dispute
arising as to the effectuation of this Award.' " (Id. at 341.)
In his appeal, Zweigel argued that he was not bound by the arbitration award because J.E.S.
Construction Co., Inc. was not joined as a party to the arbitration or enforcement proceedings. The
Third District Court of Appeal responded that if the issue were controlled by CCP 389 (joinder in a civil
action), "the absence of an indispensable party does not deprive the arbitrator of power to render a
decision as to parties before it or the court the power to enforce the decision." (Id. at 344 [emphasis
added].)
" '[Failure] to join an 'indispensable' party is not 'jurisdictional defect' in the fundamental
sense; even in the absence of an 'indispensable' party, the court still has the power to render a decision
as to the parties before it which will stand. It is for reasons of equity and convenience, and not because it
is without the power to proceed, that the court should not proceed with a case where it determines that
an 'indispensable party' is absent and cannot be joined.' " (Id.)
The court explained, however, that federal law "fashioned from the policy of our national labor laws"
controlled and that Zweigler agreed in the MOU that the arbitrator's decision binds "each individual
employer regardless of whether or not he or it changes the name or style or address of his or its
business." (Id. at 345.) It held that "Zweigle is bound by the arbitrator's determination that J.E.S.
Construction Co. is but a 'style' by which he is doing business and that Zweigle may be sanctioned for
violations of the contract by him operating as J.E.S. Construction Co. However . . . the arbitrator's award
may not operate upon J.E.S. Construction Co. and to the extent that it does it is invalid." (Id. at 347.)
Thus, pursuant to Carpenters 46, an indispensable party need not be joined in the arbitration because
the arbitrator has the power to render a decision as to parties before it.
UHW relies on Retail Clerks Union, Local 428, AFL-CIO v. L. Bloom Sons Company, Inc. (1959) 173
Cal.App.2d 701 ("Retail Clerks") and Unimart v. Superior Court (1969) 1 Cal.App.3d 1039 ("Unimart") for
the proposition that a petition to compel arbitration must be denied where an indispensable party has not
been joined, and the trial court must make the indispensable party determination. The Court is not

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convinced by UHW's analysis of the cases.

In Retail Clerks, the Union and an employer, L. Bloom Sons Company, Inc. ("L. Bloom Sons") entered
into a collective bargaining contract for stores within the county of Santa Clara. A new store opened in
Santa Clara which was owned by Bloom's Salinas, Inc. ("Bloom's Salinas") The Union alleged that the
collective bargaining agreement covered the new store and petitioned to compel arbitration. L. Bloom
Sons denied that it had any connection with or that any of its employees were employed at the new store
and that Bloom's Salinas was a separate and distinct entity. Bloom's Salinas was not a party to
collective bargaining agreement or the petition to compel arbitration. The issue as phrased by the Union
was: "Did L. Bloom Sons Co. Inc. operate the new store at Valley Fair Shopping Center, as it told the
public of San Jose it did, and were its employees accordingly subject to the existing collective bargaining
agreement? Or, was the new store controlled by a separate corporate entity sufficiently independent of
L. Bloom Sons Co., Inc., to remove the operation and the employees at Valley Fair from the impact of
the collective bargaining agreement?" (Id. at 702-703.) The Union argued that "this issue" was one for
the arbitrator. The trial court disagreed and dismissed the petition without prejudice, concluding that
"this issue" was one for the court's determination, "but that Bloom's Salinas, Inc., would be an
indispensable party to any such determination." (Id. at 703 [emphasis added].) The First District Court
of Appeal agreed with the trial court. The court stated that the Union was "in effect, urging the patently
absurd proposition that two parties can by contract effectively stipulate for the mode of determination of
the rights of a third party who has not only not assented to such a mode of determination but who also is
not even accorded an opportunity to participate in such determination." The court also held that "it must
first be determined whether Bloom's Salinas, Inc., is in fact but the alter ego of respondent. . . [t]he
proper forum for that determination is, of course, a court of law." (Id. at 703.)
Therefore, the main issue presented to the Retail Clerks court was whether the arbitrator or trial court
determines whether Bloom's Salinas was the alter ego of L. Bloom Sons. And, as the trial court noted,
Bloom's Salinas would be an indispensable party to the alter ego determination. (See Unimart v.
Superior Court (1969) 1 Cal.App.3d 1039 [citing Retail Clerk for the proposition that the trial court cannot
make an alter ego determination in the absence of the purported alter ego.].)
Similarly in Unimart, a Union entered into a collective bargaining agreement with Unimart for a certain
geographical area. The Union contended that Unimart opened a new discount store within the
geographical area using the name of its sister corporation "Two Guys" and refused to apply the
collective bargaining agreement. The trial court granted the Union's petition to compel arbitration.
Unimart appealed. The issue before the Second District Court of Appeal was "whether or not Unimart did
'acquire, establish or operate an additional store' to which the agreement must be applied." (Unimart v.
Superior Court (1969) 1 Cal.App.3d 1039, 1042.) The court acknowledged that "[s]ince an award
against Unimart will affect Two Guys, the issue necessarily involves inquiry into the relationship between
Unimart and Two Guys and its employees. The question before us is whether this is a matter to be
decided by the court or by arbitration. (Id.) The court held that the decision was for the trial court.
Relying, in part, on the Retail Clerks decision, the court stated "an employer cannot be compelled to
arbitrate if the arbitration agreement is not binding upon it. Accordingly, an arbitrator has no power to
determine the rights and obligations of one who is not a party to the arbitration agreement or arbitration
proceedings. Whether or not the arbitration provisions are operative against a party who has not signed
the arbitration agreement (Two Guys) depends upon the status of such party and its relation to the
party-employer who signed the agreement (Unimart). This involves a question of "substantive
arbitrability" which is to be determined by the court. (Id. at 1045 [emphasis in original].) The court found
that the trial court erred because it "did not determine whether Two Guys-San Bernardino, Inc. was
owned, operated or controlled by Unimart, nor could it do so in the absence of Two Guys. Rather, the
court directed that the issue be determined by the arbitrator." (Id. at 1047 [citing Retail Clerks Union v. L.
Bloom Sons Co., supra, 173 Cal.App.2d 701, 703] [emphasis added].) Thus, just as in Retail Clerks, the
issue presented to the court was whether Two Guys was the alter ego of Unimart, which was to be

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determined by the trial court.

The above cases do not support UHW's argument.
Given that there is a valid binding arbitration agreement between CHA and UHW, and the indispensable
party determination need not be made here, the petition to compel arbitration is GRANTED.
The minute order is effective immediately. No formal order pursuant to CRC Rule 3.1312 or further
notice is required.
COURT RULING
There being no request for oral argument, the Court affirmed the tentative ruling.

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