Supreme Court of California Justia
Citation 44 Cal. 4th 528, 187 P.3d 86, 79 Cal. Rptr. 3d 370

Berglund v. Arthroscopic & Laser Surgery


Filed 7/17/08

IN THE SUPREME COURT OF CALIFORNIA

DANIEL L. BERGLUND,
Plaintiff and Respondent,
S144813
v.
Ct.App.
4/1
D045218
ARTHROSCOPIC & LASER SURGERY )
CENTER OF SAN DIEGO, L.P.,
San
Diego
County
Defendant and Appellant.
Super. Ct. No. GIC753465

Must a discovery dispute involving a nonparty to an arbitration proceeding
be submitted first to the arbitrator? If so, what is the scope of judicial review of an
arbitrator’s order compelling a nonparty to the arbitration to comply with a party’s
discovery subpoena? We conclude, as the Court of Appeal did, that the dispute
must be submitted first to the arbitral, not the judicial, forum; and that the
nonparty is entitled to full judicial review of the arbitrator’s discovery order.
I
On August 23, 2000, Daniel L. Berglund filed a complaint in the San Diego
Superior Court for battery, breach of fiduciary duty, and negligence based on
medical care and treatment he received. Plaintiff alleged, among other things, that
one of his treating physicians was impaired by his abuse of narcotics at the time he
treated plaintiff. Named as defendants were a number of physicians and
organizations that had provided plaintiff with medical care, including Arthroscopic
& Laser Surgery Center of San Diego, L.P. (ALSC).
1



Berglund served on ALSC a subpoena requesting the production of certain
documents, including medication logs pertaining to “missing medications,
prescriptions and/or other chemical substances” for the period 1997 to 1999.
ALSC objected on the ground that the documents were statutorily privileged.
(Evid. Code, § 1157; Health & Saf. Code, § 1370.)

In February 2001, the superior court granted a motion by defendants other
than ALSC to compel contractual arbitration, and a retired judge became the
arbitrator. Because ALSC was not a party to any arbitration agreement,
Berglund’s case against it was not subject to arbitration and remained pending in
the superior court.
In June 2001, Berglund filed in the superior court a motion to compel
production of the requested documents. On July 23, 2001, the court denied the
motion to compel production, ruling that, as ALSC had asserted, the documents
were statutorily privileged. After Berglund filed a first amended complaint against
ALSC, Berglund and ALSC settled the court action. In October 2003, the superior
court approved the settlement as having been entered in good faith. (Code Civ.
Proc., § 877.6, subd. (c).)1 The court then dismissed with prejudice Berglund’s
complaint against ALSC.
In July 2004, in the arbitration proceeding, Berglund served on ALSC, a
nonparty to the arbitration, a discovery subpoena for the production of ALSC’s
“documents reflecting inventory lists of Narcotic medications which were
discovered missing during the period of time from 1996 to January of 2000.”
ALSC asserted that the documents were privileged and on August 9 it sought a
protective order in the superior court to preclude Berglund from obtaining the

1
All further statutory references are to the Code of Civil Procedure.
2



documents he had sought to discover at the arbitration proceeding, to which ALSC
was not a party.
Thereafter, Berglund filed with the arbitrator a motion to compel
production of the documents. On September 23, 2004, the arbitrator concluded
that he had jurisdiction to rule on the motion, and he directed ALSC to produce the
requested documents for the arbitrator’s in camera review.
On October 7, 2004, the superior court denied ALSC’s August 9 motion
for a protective order. The court ruled that the arbitrator, not the court, had
jurisdiction over Berglund’s discovery subpoena and thus was empowered to
compel, as the arbitrator had done, production of the subpoenaed documents.
ALSC then filed in the superior court a notice of appeal, and it filed in the Court of
Appeal a motion for a stay, or alternatively a petition for writ of supersedeas,
prohibition, or other appropriate relief. The Court of Appeal denied the request
for a stay and it denied the writ petition, but it allowed ALSC’s appeal to proceed
with respect to the superior court’s order denying ALSC’s motion for a protective
order. A divided Court of Appeal panel reversed and remanded the matter for
further proceedings.
The lead opinion of the three-justice panel of the Court of Appeal held in
part I that an arbitrator has statutory authority to enforce discovery subpoenas
against a nonparty in personal injury cases (§ 1283.05, subd. (b)), and that
therefore the arbitration proceeding is the proper forum for a nonparty to challenge
the discovery sought by a party to the arbitration. In part II, the lead opinion held
that the limitations on judicial review of arbitration decisions involving parties to
the arbitration are not applicable to an arbitrator’s discovery orders against
nonparties. To hold otherwise, the lead opinion reasoned, would be a radical
departure from the principle that persons or entities cannot be forced to arbitrate
controversies that they have not agreed to arbitrate. (See Freeman v. State Farm
3

Mut. Auto. Ins. Co. (1975) 14 Cal.3d 473, 481; Marsch v. Williams (1994) 23
Cal.App.4th 250, 255.) It stated that “[i]n the absence of an express and
unambiguous provision in the statute, it is difficult to conclude the Legislature
intended to deny nonparties full judicial review of an arbitrator’s discovery
orders.” (Italics added.) One justice agreed with the lead opinion’s holding in part
I of the opinion but not with its holding in part II. The other justice concurred in
the lead opinion’s holding in part II but did not join its holding in part I. We
granted Berglund’s petition for review to decide whether an arbitrator’s discovery
order against a nonparty is subject to full judicial review.
II
Generally,
an
arbitrator’s
decision in a dispute between parties to an
arbitration agreement is subject to only limited judicial review. This is why: An
“arbitration decision is final and conclusive because the parties have agreed that it
be so.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10.) Arbitration by
agreement is often a “process in which parties voluntarily trade the safeguards and
formalities of court litigation for an expeditious, sometimes roughshod means of
resolving their dispute.” (Vandenberg v. Superior Court (1999) 21 Cal.4th 815,
831.) Because “arbitral finality is a core component of the parties’ agreement to
submit to arbitration” (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 10) and
because arbitrators are not required to make decisions according to the rule of law,
parties to an arbitration agreement accept the risk of arbitrator errors (id. at p. 12),
and arbitrator decisions cannot be judicially reviewed for errors of fact or law even
if the error is apparent and causes substantial injustice (id. at pp. 11, 33; see
Vandenberg v. Superior Court, supra, 21 Cal.4th at p. 832). “ ‘As a consequence,
4

arbitration awards are generally immune from judicial review.’ ” (Moncharsh v.
Heily & Blase, supra, 3 Cal.4th at p. 11.)2
Discovery in arbitration is generally limited. (Alexander v. Blue Cross of
California (2001) 88 Cal.App.4th 1082, 1088; Coast Plaza Doctors Hospital v.
Blue Cross of California (2000) 83 Cal.App.4th 677, 690.) Sections 1283.1 and
1283.05, however, grant arbitrators authority over discovery in certain arbitration
proceedings. Section 1283.1’s subdivision (a) provides that section 1283.05 is
incorporated into and made a part of every agreement to arbitrate any dispute
arising out of a claim for wrongful death or for personal injury.
As pertinent here, section 1283.05’s subdivision (a) states that after the
appointment of an arbitrator, the parties to the arbitration have the same rights to
take depositions and obtain discovery and to “exercise all of the same rights,
remedies, and procedures, and be subject to all of the same duties, liabilities, and
obligations in the arbitration . . . as provided in” the statutory provisions governing
subpoenas (§§ 1985-1997) and in the Civil Discovery Act (§ 2016.010 et seq.) “as
if the subject matter of the arbitration were pending before a superior court of this
state in a civil action . . . .” Thus, parties to arbitration have a right to discovery.

2
The authority of the courts to vacate an arbitration award is limited by
statute. Courts may vacate an award when (1) the award was procured by
corruption, fraud, or other undue means; (2) an arbitrator was corrupt;
(3) misconduct of the arbitrator substantially prejudiced a party’s rights; (4) the
arbitrator exceeded his or her powers; (5) an arbitrator’s refusal to postpone the
hearing or hear material evidence substantially prejudiced the rights of a party; or
(6) an arbitrator failed to disclose a ground for disqualification or improperly
failed to disqualify himself or herself. (§ 1286.2, subd. (a).) With respect to
arbitrations involving unwaivable statutory rights, they are subject to judicial
review “ ‘sufficient to ensure that arbitrators comply with the requirements of the
statute’ at issue.” (Armendariz v. Foundation Health Psychcare Services, Inc.
(2000) 24 Cal.4th 83, 106.) None of these situations is present here.
5



And because section 1283.05’s subdivision (a) incorporates the Civil Discovery
Act and that law permits discovery from nonparties (§ 2020.010 et seq.), the right
to discovery includes discovery from nonparties.
Section 1283.05’s subdivision (b) grants arbitrators the power to enforce
discovery through sanctions “as can be or may be imposed in like circumstances in
a civil action by a superior court of this state under the provisions of [the Code of
Civil Procedure], except the power to order the arrest or imprisonment of a
person.” Thus, in an arbitration proceeding the arbitrator’s power to enforce
discovery resembles that of a judge in a civil action in superior court (Alexander v.
Blue Cross of California, supra, 88 Cal.App.4th at p. 1090), including the
authority to enforce discovery against nonparties through imposition of sanctions
(§ 2023.030).
Section 1283.05’s subdivision (c) grants arbitrators the power to issue
discovery orders imposing “terms, conditions, consequences, liabilities, sanctions,
and penalties,” and it states that “such orders shall be as conclusive, final, and
enforceable as an arbitration award on the merits, if the making of any such order
that is equivalent to an award or correction of an award is subject to the same
conditions, if any, as are applicable to the making of an award or correction of an
award.” (Italics added.)
We agree with the Court of Appeal majority that all discovery disputes
arising out of arbitration must be submitted first to the arbitral, not the judicial
forum. That conclusion follows logically from section 1283.05, which grants
parties to an arbitration proceeding the right to discovery, including discovery
from nonparties; authorizes arbitrators to order discovery; and expressly gives
arbitrators the power to enforce discovery rights and obligations. Because the
Legislature granted arbitrators the authority to order a nonparty to an arbitration
proceeding to provide discovery to a party and granted arbitrators the power to
6

enforce discovery, it is reasonable to infer that the Legislature intended discovery
disputes arising out of arbitration to be initially litigated before the arbitrator.
Earlier, we mentioned that existing law provides for only limited judicial
review of an arbitration decision against a party. (See pp. 4-5 & fn. 2, ante.)
According to Berglund, such limited judicial review also applies to an arbitrator’s
discovery order against a nonparty, as ALSC is here. In support, Berglund cites
section 1283.05. But subdivisions (a) and (b) of that statute say nothing about the
scope of judicial review of an arbitrator’s discovery decision against a nonparty.
Nor, as we shall explain, does the language of subdivision (c) lend support to
Berglund’s view.
That provision states in pertinent part that an arbitrator’s discovery order is
“as conclusive, final, and enforceable as an arbitration award on the merits.”
(§ 1283.05, subd. (c), italics added.) In this way, the statute links arbitrator
discovery orders to arbitration awards — making arbitrator discovery orders
neither more nor less conclusive, final, and enforceable than arbitration awards on
the merits. Because the existence and scope of judicial review affects the finality
and conclusiveness of an order or decision, we construe this language as making
arbitration awards subject to judicial review that is neither more nor less limited
than judicial review of arbitration awards. Accordingly, we proceed with our
analysis by examining the scope of judicial review of arbitration awards as to both
parties and nonparties.
As discussed on pages 4 and 5, ante, judicial review of arbitration awards
as to parties is limited. Therefore, unless the arbitrator’s award falls into one of
the few applicable exceptions (see ante, at p. 5, fn. 2), the arbitrator’s award is
conclusive and final as to the parties. But does that finality extend to nonparties?
The answer is “no,” because without consent a nonparty to an arbitration
agreement cannot be compelled to arbitrate a dispute. (Buckner v. Tamarin (2002)
7

98 Cal.App.4th 140, 142; Benasra v. Marciano (2001) 92 Cal.App.4th 987, 990;
Rhodes v. California Hospital Medical Center (1978) 76 Cal.App.3d 606, 609; see
EEOC v. Waffle House, Inc. (2002) 534 U.S. 279, 294 [“It goes without saying
that a contract cannot bind a nonparty”]; Vandenberg v. Superior Court, supra, 21
Cal.4th at p. 831 [nonparties to arbitration award cannot invoke doctrine of
collateral estoppel against parties to an arbitration award].)
By linking arbitrator discovery orders to arbitration awards in section
1283.05’s subdivision (c) — giving both the same degree of finality and thus, by
implication, the same scope of judicial review — the Legislature has made the rule
limiting judicial review of arbitration awards applicable as well to judicial review
of arbitrator discovery orders. But did the Legislature intend to make that rule
applicable when judicial review is sought by a nonparty to the arbitration, or only
when judicial review is sought by a party? The pertinent language in subdivision
(c) is susceptible of either interpretation.
One way to construe the statutory language making an arbitrator’s
discovery order “as conclusive, final, and enforceable as an arbitration award”
(§ 1283.05, subd. (c)) is to impose on judicial review of an arbitrator discovery
order, whether sought by a party or a nonparty, the same limitations that would
apply to a party’s review of an arbitration award. But that construction would
violate the principle that nonparties to arbitration are not bound by an arbitrator’s
decision because the arbitrator’s authority is derived from the parties’ consent and,
as we explained earlier, nonparties have not consented to arbitration.
The other way to construe that statutory language is to impose on judicial
review of arbitrator discovery orders the limitations that would apply to a party’s
review of an arbitration award only when a party seeks judicial review of the
order, allowing nonparties to obtain full judicial review of arbitrator discovery
orders made against them. By requiring a more thorough and exacting judicial
8

review of arbitrator discovery orders against nonparties, that construction would
impose greater burdens on judicial resources, but it would also provide greater
protection of the legal rights of nonparties who, by definition, have not consented
to arbitration. As discussed at page 4, ante, arbitrators are not required to follow
the law when resolving the parties’ disputes, and their decisions as to parties
cannot be judicially reviewed for errors of fact or law. Thus, giving arbitrator
discovery orders the same deference normally given arbitration awards would
substantially compromise the legal rights of nonparties against whom erroneous
discovery orders may be made.
To determine whether arbitrator discovery orders against nonparties are
subject to full or only limited judicial review, we apply the rule of construction
that when a statutory provision is susceptible of two alternative interpretations, the
one that leads to the most reasonable result will be followed. (People v. Shabazz
(2006) 38 Cal.4th 55, 68.) Here, construing section 1283.05’s subdivision (c) as
allowing full judicial review of arbitrator discovery orders against nonparties leads
to the most reasonable result because it preserves the legal rights of nonparties.
That interpretation is also consistent “with our common practice of
construing statutes, when reasonable, to avoid difficult constitutional questions.”
(Le Francois v. Goel (2005) 35 Cal.4th 1094, 1105.) As pointed out by ALSC, a
nonparty to the arbitration proceeding here, a contrary conclusion would implicate
the nonparty’s constitutional rights to due process of law (U.S. Const., 5th & 14
Amends.; Cal. Const., art. I, § 7) because, as we noted earlier, the normal
limitations on judicial review of arbitrator decision mean that arbitrators need not
follow the law and, apart from some narrow exceptions, their errors are not subject
to judicial review and correction. Also, a statutory construction severely
restricting a nonparty’s right to judicial review of an arbitrator’s discovery orders
would raise serious separation-of-powers concerns insofar as it vested in a
9

nongovernmental body (the arbitrator), and removed from the judicial branch, the
authority to determine the legal rights of a person who had never agreed,
contractually or otherwise, to be bound by the nonjudicial body’s decisions. (See
McClung v. Employment Development Dept. (2004) 34 Cal.4th 467, 472 [“ ‘The
judicial power is conferred upon the courts by the Constitution and, in the absence
of a constitutional provision, cannot be exercised by any other body’ ”];
Department of Social Services v. Superior Court (1997) 58 Cal.App.4th 721, 738
[judicial function is to declare law and determine rights].)
Unpersuasive is Berglund’s contention that because section 1283.05’s
subdivision (c) does not expressly exclude nonparties from its reach, it should be
construed as providing only limited, not full, judicial review of an arbitrator’s
decision against a nonparty. The statutory language, however, is silent on the
question. We cannot here draw any conclusions from the absence of legislative
action. (See Mejia v. Reed (2003) 31 Cal.4th 657, 668.)
Insisting that arbitrator discovery orders against nonparties are subject only
to the limited judicial review that governs arbitration awards to parties, Berglund
cites to the rule of statutory construction that statutes are to be harmonized to
avoid anomalies. (Fair v. Bakhtiari (2006) 40 Cal.4th 189, 199.) Berglund argues
it would be anomalous to construe the statutory language in section 1283.05’s
subdivision (c) as requiring nonparty discovery disputes in arbitration proceedings
to be submitted to the arbitrator (§ 1283.05, subd. (b)) without also construing
subdivision (c) as requiring finality of arbitrator discovery decisions. We perceive
no anomaly in a statute under which parties to arbitration may seek discovery,
discovery disputes are submitted to the arbitrator, and arbitrator discovery
decisions against nonparties are subject to full judicial review. Such a system
promotes judicial economy by requiring discovery disputes arising out of
arbitration to be submitted first to arbitrators—who may be able to resolve many
10

of those disputes—while protecting the legal rights of nonparties by allowing full
judicial review of adverse arbitrator discovery orders against them. Unlike parties
to the arbitration, nonparties, by definition, have not consented to arbitration and
consequently have not agreed to the finality of arbitrator decisions. In this
context, therefore, the principle of statutory construction that statutory provisions
are to be harmonized is inapplicable.
Contrary to Berglund’s argument, affording nonparties to arbitration
proceedings full judicial review of arbitrator discovery orders against nonparties
does not undermine the policy in favor of arbitration, is not compelled by
considerations of judicial efficiency, and will not result in inconsistent rulings.
Arbitration, as we pointed out earlier, is consensual. (§ 1281.) The policy in favor
of enforcing arbitration agreements (Armendariz v. Foundation Health Psychcare
Services, Inc., supra, 24 Cal.4th at pp. 96-97) is based on the assumption that
“parties have elected to use [arbitration] as an alternative to the judicial process”
(County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47
Cal.App.4th 237, 244; see Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 10
[“an arbitration decision is final and conclusive because the parties have agreed
that it be so”]). But that policy does not extend to those who are not parties to the
arbitration agreement and, by definition, have not consented to arbitration.
(County of Contra Costa v. Kaiser Foundation Health Plan, Inc., supra, 47
Cal.App.4th at pp. 244-245; see Volt Info. Sciences, Inc. v. Leland Stanford Jr. U.
(1989) 489 U.S. 468, 478.) Although judicial efficiency is important, it must yield
to the judiciary’s primary function of protecting legal rights. (See Department of
Social Services v. Superior Court, supra, 58 Cal.App.4th at p. 738 [courts
“determine the rights of parties to a controversy before the court”].) Here, the
legal rights at issue are those of a nonparty to the arbitration proceeding. Finally,
there is no risk of inconsistent decisions between the arbitrator and the court: If,
11

upon judicial review of the arbitrator’s discovery order, the court determines that
the arbitrator erred, the court’s decision supersedes that of the arbitrator.
Nothing in the statutory scheme governing an arbitrator’s discovery
decisions indicates an intent by the Legislature to deprive a nonparty to the
arbitration agreement—who, by definition, has not consented to the arbitration—
of full judicial review of an adverse discovery order by the arbitrator.
DISPOSITION
The judgment of the Court of Appeal is affirmed.
KENNARD,
J.
WE CONCUR:

GEORGE, C. J.
BAXTER, J.
WERDEGAR, J.
CHIN, J.
MORENO, J.
CORRIGAN, J.

12



See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Berglund v. Arthroscopic & Laser Surgery Center of San Diego, LP
__________________________________________________________________________________

Unpublished Opinion


Original Appeal
Original Proceeding
Review Granted
XXX 139 Cal.App.4th 904
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S144813
Date Filed: July 17, 2008
__________________________________________________________________________________

Court:

Superior
County: San Diego
Judge: Linda B. Quinn

__________________________________________________________________________________

Attorneys for Appellant:

Higgs, Fletcher & Mack, John Morris, William A. Miller and Michael S. Faircloth for Defendant and
Appellant.

__________________________________________________________________________________

Attorneys for Respondent:

Law Office of Marc O. Stern and Marc O. Stern for Plaintiff and Respondent.



Counsel who argued in Supreme Court (not intended for publication with opinion):

John Morris
Higgs, Fletcher & Mack
401 West A Street, Suite 2600
San Diego, CA 92101
(619) 236-1551

Marc O. Stern
Law Office of Marc O. Stern
8070 La Jolla Shores Drive, #519
San Diego, CA 92037
(858) 677-9200


Petition for review after the Court of Appeal reversed an order in a civil action. This case presents the following issues: (1) When an arbitrator issues a discovery order to a third party who is not bound by the arbitration agreement, may that third party seek judicial review of its objections to discovery? (2) If so, what is the scope of judicial review of such an order?

Opinion Information
Date:Citation:Docket Number:Category:Status:Cross Referenced Cases:
Thu, 07/17/200844 Cal. 4th 528, 187 P.3d 86, 79 Cal. Rptr. 3d 370S144813Review - Civil Appealclosed; remittitur issued

BERGLUND v. S.C. (LOSSE) (S099076)


Parties
1Berglund, Daniel L. (Plaintiff and Respondent)
Represented by Marc O. Stern
Attorney at Law
8070 La Jolla Shores Drive, Suite 519
La Jolla, CA

2Arthroscopic & Laser Surgery Center Of San Diego (Defendant and Appellant)
Represented by John M. Morris
Higgs Fletcher & Mack, LLP
401 West "A" Street, Suite 2600
San Diego, CA

3Arthroscopic & Laser Surgery Center Of San Diego (Defendant and Appellant)
Represented by William Albert Miller
Higgs Fletcher & Mack, LLP
401 West "A" Street, Suite 2600
San Diego, CA


Disposition
Jul 17 2008Opinion: Affirmed

Dockets
Jun 30 2006Petition for review filed
  Daniel L. Berglund, respondent Marc O. Stern, counsel
Jul 5 2006Received Court of Appeal record
  two doghouse
Jul 19 2006Answer to petition for review filed
  Aarthroscopic and Laser Surgery Center of San Diego, defendant/appellant by John Morris and William A. Miller of Higgs, Fletcher & Jack LLP, retained counsel. (Filed in San Diego)
Jul 21 2006Request for depublication (petition for review pending)
  filed by Marc O. Stern on behalf of Respondent Daniel L. Berglund. [ Filed in San Diego ]
Jul 28 2006Opposition filed
  by counsel for Respondent, Arthroscopic and Laser Surgery Center of San Diego, L.P., to partial depublication request. John Morris of Higgs Fletcher & Mack LLP, retained counsel. (Filed in San Diego)
Aug 23 2006Letter sent to:
  all parties enclosing a copy of the grant order and the form for certification of interested entities and parties.
Aug 23 2006Petition for review granted (civil case)
  Corrigan, J., was absent and did not participate. Votes: George, C.J., Kennard, Baxter, Werdegar, Chin, and Moreno, JJ.
Sep 5 2006Certification of interested entities or persons filed
  by Marc O. Stern, counsel for Respondent Berglund.
Sep 6 2006Certification of interested entities or persons filed
  John M. Morris of Higgs, Fletcher & Mack LLP, counsel for appellant [Arthroscopic] (Filed in San Diego)
Sep 22 2006Request for extension of time filed
  By respondent requesting a 60-day extension to and including November 21, 2006 to file Respondent's Opening Brief on the Merits.
Sep 26 2006Extension of time granted
  On application of respondent and good cause appearing, it is ordered that the time to serve and file respondent's opening brief on the merits is hereby extended to and including November 21, 2006.
Nov 21 2006Opening brief on the merits filed
  Daniel L. Berglund, plaintiff and respondent by Marc O. Stern, counsel
Dec 21 2006Answer brief on the merits filed
  Arthroscopic and Laser Surgery Center of San Diego, L. P. dba Healthsouth Arthroscopic & Laser Surgery Center of San Diego, defendant and appellant by John Morris and William A. Miller of Higgs, Fletcher & Mack LLP, retained. (Filed in San Diego)
Jan 10 2007Reply brief filed (case fully briefed)
  Daniel L. Berglund, plaintiff and respondent by Marc O. Stern, retained counsel (Filed in San Diego)
Apr 14 2008Case ordered on calendar
  to be argued on Tuesday, May 6, 2008, at 9:00 a.m. in San Francisco
May 6 2008Cause argued and submitted
 
Jul 16 2008Notice of forthcoming opinion posted
 
Jul 17 2008Opinion filed: Judgment affirmed in full
  Opinion by: Kennard, J. -----joined by: George, C. J., Baxter, Werdegar, Chin, Moreno, and Corrigan, JJ.
Aug 18 2008Remittitur issued (civil case)
 
Sep 2 2008Received:
  Acknowledgment of receipt for remittitur, signed for by C. tunnell, Deputy Clerk, Fourth Appellate District, Division One (San Diego)

Briefs
Nov 21 2006Opening brief on the merits filed
 
Dec 21 2006Answer brief on the merits filed
 
Jan 10 2007Reply brief filed (case fully briefed)
 
If you'd like to submit a brief document to be included for this opinion, please submit an e-mail to the SCOCAL website
Dec 5, 2008
Annotated by diana teasland

Written by: John Robinson

Facts of the Case: Daniel L. Berglund was a patient at the Arthoscopic & Laster Surgery Center of San Diego (ALSC). He alleged that one of his treating physicians was “impaired by the use of narcotics” while he was under treatment. He claimed that the physician was abusing one or some combination of vicodin, percodan, percocet, lortab, norco, darvocet, codeine and/or tylenol with codeine and/or any other hydrocodone or oxycontin compound. ALSC was initially party to the suit, along with a number of other defendants. The plaintiff settled his case with the ALSC, and they were dismissed as a party to the suit. In the mean time, the remaining defendants compelled arbitration. In arbitration, the plaintiff subpoenaed evidence protected under California statute from ALSC (Evid. Code, § 1157; Health & Saf.Code, § 1370.); ALSC was not a party to the arbitration. The arbitrator compelled production, and the ALSC sought judicial protection.

Procedural Posture: The trial court denied ALSC’s motion for a protective order, and ruled that the arbitrator had the power to compel production of the subpoenaed documents, despite their protected status. The Court of Appeal for the 4th Appellate District of California reversed the trial court’s decision and remanded the case. Berglund v. Arthroscopic & Laser Surgery Center, 142 P.3d 1185 (2006). The Supreme Court of California granted Berglund’s petition for review. See Summary of Cases Accepted During the Week of August 21, 2006.

Questions Presented:
(1) When an arbitrator issues a discovery order to a third party who is not bound by the arbitration agreement, may that third party seek judicial review of its objections to discovery?
(2) If so, what is the scope of judicial review of such an order?

Holding:
(1) Nonparties may seek judicial review of arbitrators’ discovery orders after first seeking relief from the arbitrator. See below.
(2) Arbitrator’s decisions with respect to non-parties to the dispute under arbitration are subject to full judicial review; “if, upon judicial review of the arbitrator’s discovery order, the court determines that the arbitrator erred, the court’s decision supersedes that of the arbitrator.” See below.

Legal Topics and Important Points of Law:

• 1. Arbitration:
A. Review of Arbitrator’s Authority, as to Parties: The authority of an arbitrator as to decisions relating to the parties to the arbitration agreement is subject limited judicial review. Moncharsh v. Heily & Blase, 3 Cal.4th 1 (1992); Vandenberg v. Superior Court, 21 Cal.4th 815 (1999).

B. Scope of Discovery in Arbitration: The scope of discovery in arbitration is generally quite limited. Alexander v. Blue Cross of California, 88 Cal.App.4th 1082 (2001); Coast Plaza Doctors Hospital v. Blue Cross of California, 83 Cal.App.4th 677 (2000).

C. Permissibility of Discovery Against Non-Parties to an Arbitration: Parties to an arbitration have a right to discovery under California statute. California Code of Civil Procedure Section 1283.05; Civil Discovery Act (§ 2016.010 et seq.).

D. Process of Review of Arbitration Discovery Disputes: Because the arbitrator has authority over the arbitration discovery process, all discovery disputes arising in arbitration must first be submitted to the arbitrator, before being appealed to the courts.

E. Review of Arbitrator’s Authority, as to Non-Parties: The finality of an arbitrator’s award determination is not final as to non-parties, although it generally is to parties to the arbitration. The arbitration contract does not bind non-parties. Buckner v. Tamarin, 98 Cal.App.4th 140 (2002); Benasra v. Marciano, 92 Cal.App.4th 987 (2001); Rhodes v. California Hospital Medical Center, 76 Cal.App.3d 606 (1978); see also EEOC v. Waffle House, Inc., 534 U.S. 279 (2002).

- Final Authority over Non-Parties: The court retains the final authority to review arbitrators’ decisions, and the court’s decision is determinative.

F. Applicability of the Law to Arbitrator’s Decisions: Arbitrators are not required to comply with the law when resolving the disputes of the parties to the arbitration agreement.

• 2. Statutory Interpretation
A. Statutes and the Constitution: when reasonable and possible to do so, statutes should be understood I a way that minimizes difficult constitutional questions. Le Francois v. Goel, 35 Cal.4th 1094 (2005).

• 3. Constitutional Law
A. Restrictions on Exercising Judicial Power: The judicial power is vested, by the Constitution, in the judiciary. Short of a constitutional amendment or other provision to the contrary, the judicial power cannot be exercised by any other forum or person (unless that person has consented to such authority, as in arbitration). McClung v. Employment Development Dept., 34 Cal.4th 467 (2004); Dept. of Social Services v. Superior Court, 58 Cal.App.4th 721 (1997).

Additional Resources:

• Reviewer’s Opinion of the Case
- In the opinion of this reviewer, this case is good case law. The case both (1) promotes fairness in the arbitration process and (2) promotes judicial efficiency.

- Fairness – under the theory of contract law, contracts only bind parties that mutually agree to enter into the in exchange for consideration. It makes sense for those parties, who have agreed to be so bound, to be held liable for the decisions (whether settlement or discovery related) of the arbitrator that they have chosen. On the other hand, third-parties are merely by-standers to the contract, and have not agreed to be bound. It would be unfair to bind a third-party to the substantial discovery costs associated with an agreement between two unrelated parties.

- Judicial efficiency – Although there is potential for this decision to increase the overall costs borne by the judicial system, which will now be bound to give full review to discovery orders against third-parties in arbitration disputes, the opinion mitigates this effect by requiring that disputes first be submitted to arbitral forum. If, as the opinion’s author suggests, many of these disputes can be resolved at that level, then the net impact on judicial resources may, in fact, be de minimus.