• A
  • |
  • A
  • Text size

Arbitration

Franks v. Bowers, 2013 U.S. LEXIS 8703 (2013)

116 So.3d 1240 (Fla. 2013)

Also under Professional liability

Outcome:    Unfavorable

Issue

The issue in this case was whether a contract between a surgery practice and its patient was valid if the contract required arbitration of disputes concerning the medical services provided and limited the non-economic damages the patient could potentially recover in the event of malpractice.

AMA interest

The AMA believes physicians and patients should be free to agree to pre-dispute binding arbitration for non-emergency medical treatment.

Case summary

Joseph Franks sought surgical treatment from Dr. Gary J. Bowers and Dr. Bowers’ employer, North Florida Surgeons, P.A. Mr. Franks was asked to sign a four page document entitled “Financial Agreement,” and he did. The Financial Agreement provided, inter alia, that (a) any disputes between the parties would be resolved by arbitration, and (b) any non-economic damages arising from medical negligence would be capped at $250,000.

Four months after the signing of the Financial Agreement, Dr. Bowers performed the surgery.  Mr. Franks was then discharged to his home. Two days later, he experienced pain and went to a hospital emergency room. A CT scan revealed a large retroperitoneal hematoma at the operative site due to the external iliac vein having been lacerated during the surgery. Two weeks later, he died.

Donna Franks, Mr. Franks’ widow, sued for wrongful death, alleging medical malpractice. Based on the Financial Agreement, the defendants moved to compel arbitration. Their motion was granted. Mrs. Franks appealed to the Florida First District Court of Appeal, contending the Financial Agreement was contrary to public policy and was unconscionable. The District Court of Appeal disagreed with Mrs. Franks and affirmed the trial court. Mrs. Franks then appealed to the Florida Supreme Court.

The Florida Supreme Court noted that the Florida statutes provide for arbitration of medical malpractice disputes on agreement of the parties and for limitation of noneconomic damages (either under arbitration or in a court of law), but the Financial Agreement did not exactly track the remedies available under Florida law.   According to the Florida Supreme Court, the Financial Agreement contravened the legislative scheme that was to apply to medical malpractice claims and was therefore invalid. Furthermore, the court found the arbitration provision and the limitation of damages provisions were not severable, so the court concluded the Financial Agreement had to be voided in its entirety. The court also found that neither the Federal Arbitration Act nor a parallel Florida statute, the Florida Arbitration Code, required arbitration. The court specifically declined to address whether the Financial Agreement was unconscionable. Two Florida Supreme Court justices dissented.

The defendants petitioned the United States Supreme Court for certiorari, but certiorari was denied on December 2, 2013

Litigation Center involvement

The Litigation Center offered to contribute toward the cost of the certiorari petition.

 

Kansas City Urology v. Blue Cross and Blue Shield of Kansas City (Mo. Ct. App.)

Outcome:    Very unfavorable

Issue

The issue in this case was whether insurance companies can compel arbitration of physicians' claims that the insurers violated Missouri antitrust laws by conspiring to pay reduced fees to physicians and physician groups with whom they had entered into provider agreements.

AMA interest

Although the AMA supports arbitration clauses in certain contexts, it believes that the arbitration provisions at issue in this case are inapplicable and unenforceable. Among other things, the parties did not agree to arbitrate the antitrust dispute at issue.

Case summary

The plaintiff physician groups initiated a class action lawsuit against insurance companies alleging an antitrust conspiracy for their reducing payments to the physicians on their provider panels.

The insurance companies moved to compel arbitration, based on arbitration clauses in their provider agreements with plaintiffs. The trial court found the arbitration clauses unenforceable and denied the motions to compel arbitration. It found that the requested arbitration would effectively immunize the insurance companies from the type of claims brought by plaintiffs and prevent the enforcement of plaintiffs' antitrust claims. Defendants appealed.

Litigation Center involvement

The Litigation Center along with the Missouri State Medical Association filed a motion in the Missouri Court of Appeals to submit an amicus curiae brief to support the plaintiffs. The brief argued that the arbitration clauses are unconscionable because they were created and imposed on a take-it-or-leave-it basis, and contain impermissible limitation of damages provisions. The Court of Appeals denied leave to file the amicus brief.

Sutter v. Oxford Health Plans, 133 S.Ct. 2064 (2013)

Also under Managed Care Payments and Payment Issues (for physicians)

Outcome:    Very favorable

Issue

The issue in this case was whether an arbitrator could authorize a class arbitration without a specific provision in the arbitration agreement that allowed such action.

AMA interest

The AMA supports lawsuits that seek redress from insurers who engage in inappropriate or inaccurate downcoding and/or recoding practices.

Case summary

Dr. John Sutter signed a participation contract with Oxford Health Plans.  This contract required as follows:

"No civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration ... pursuant to the Rules of the American Arbitration Association."

Dr. Sutter filed an arbitration claim, alleging that Oxford had systematically bundled, downcoded, and delayed payments for his services and the services of approximately 20,000 other physicians in its network.  He requested that the claim be tried on a class basis.  After considering the scope of the arbitration clause, the arbitrator inferred an intent within that clause to allow class arbitration, and he ordered that the arbitration proceed as a class action.

Oxford then sued in the United States District Court of New Jersey to have the class arbitration award vacated, and the case bounced back and forth between the District Court and the Third Circuit Court of Appeals.  On April 3, 2012, the Third Circuit found that the arbitrator had interpreted the arbitration clause reasonably and was entitled to some deference in making that interpretation.  It affirmed the District Court order denying Oxford's motion to vacate the arbitration award.  Oxford appealed to the United States Supreme Court.

On June 10, 2013, the Supreme Court unanimously affirmed the Third Circuit ruling in favor of Dr. Sutter.  As a result of the Supreme Court ruling, the arbitration, which was filed in 2002, was then allowed to proceed with the merits.

Litigation Center involvement

The Litigation Center, along with the Medical Society of New Jersey, filed an amicus brief in support of Dr. Sutter.

United States Supreme Court brief