Mount Diablo Medical Center v. Health Net of California

CERTIFIED FOR PUBLICATION We confront what one commentator has characterized as ""the thorny question of contract construction raised by the generic choice-of-law clause"" in an agreement calling for the resolution of disputes by arbitration. 1 Appellant Health Net of California, Inc. (Health Net) appeals from the denial of its petition to compel arbitration of the claims of respondent Mount Diablo Medical Center (Mt. Diablo) and to stay the litigation in which Mt. Diablo asserts those claims. The trial court denied the petition under Code of Civil Procedure section 1281.2, subdivision (c) (hereafter section 1281.2(c)), finding that the arbitration would create a risk of rulings that conflict with rulings in pending litigation involving third parties. Health Net contends the clause choosing California law in the contract between the parties does not evince an intention to render their agreement to arbitrate subject to the terms of the California Code of Civil Procedure, so that section 1281.2(c) has been preempted by the Federal Arbitration Act, 9 United States Code section 1 et seq. (FAA), and that the federal statute requires that the arbitration agreement be enforced despite the potential for conflicting results. The trial court read the choice-of- law provision more broadly and therefore rejected this contention. We interpret the authorities on the subject to require the court to look first to the language of the contract to determine what portions of state law the parties intended to incorporate, and then, if any ambiguity exists, to determine whether the provision in question conflicts with the objectives of the FAA. Under this approach, we conclude that the parties intended to incorporate California procedural law governing the enforcement of their agreement to arbitrate, and that these provisions are not preempted. Therefore we affirm.