American Arbitration Association Breaks Its Promise Not to Hear Pre-Dispute Arbitrations in Health Care Cases
Although most people haven’t heard of it, they have a big stake in the integrity and honesty of the American Arbitration Association (“AAA”). The reason is simple: it’s rapidly gaining more and more power over Americans. More and more big corporations insist that their customers and employees sign mandatory arbitration agreements taking away their right to go to court as a condition of getting goods or services or as a condition of getting or keeping a job. And of the private corporations that are increasingly replacing the American civil justice system, the AAA is the most prominent and largest.
To allay the concerns expressed by many consumers, employees, legislatures and courts, the AAA has repeatedly promised that Americans need not worry about the growing power of arbitrators, because the AAA will purportedly exercise great restraint in the exercise of its power. Alas, talk is cheap.
In a number of public statements over the last four years, the AAA has solemnly promised the public, the media and legislators that notwithstanding any contract agreements to the contrary, it would not handle pre-dispute binding arbitrations in cases brought by medical patients against health care institutions. But, I have just learned of a serious instance where the AAA has quietly broken that widely trumpeted promise. Apparently, the AAA IS administering arbitrations in medical cases when it feels like doing so.
AAA Broke Its 1997 Promise to Not Handle Health Care Cases
Back in 1997, the AAA, in cooperation with the American Bar Association and the American Medical Association, formed a commission on health care dispute resolution to study and make recommendations on the appropriate use of alternative dispute resolution in claims involving health care. (Commission on Health Care Dispute Resolution, Final Report July 27, 1998) The Commission determined that arbitration is NOT appropriate in disputes involving patients, unless the parties agree to arbitrate after the dispute arises. (Id.) This news was greeted as a very positive development by advocates for medical patients.
Unfortunately, the AAA didn’t keep its 1997 promise. As one newspaper reported, “in 2000, [AAA] Senior Vice President Robert Meade stated in an affidavit that the organization did not require its arbitrators to comply with that policy.” (Reynolds Holding, “Arbitration reform in works; Assembly panel to propose broad changes in maligned system,” San Francisco Chronicle March 11, 2002.) In other words, while AAA joined in a report concluding that pre-dispute binding arbitration was not appropriate in health care cases, AAA arbitrators continued to resolve such arbitrations in such cases, under the auspices of the AAA.
AAA’s New Promise in 2002 to Not Handle Pre-Dispute Arbitrations in Health Care Cases
The AAA’s cavalier decision to break its 1997 promise did not go unnoticed, however, and in 2002 the AAA saw that the California legislature was seriously considering a series of proposals to reform the business of arbitration. Some of these proposals passed, notwithstanding the AAA’s staunch opposition, including strengthened ethics and disclosure rules for arbitrators. Some of the other proposals were killed for the time being, however, including a bill that would have sharply limited the immunity that arbitrators enjoy for their conduct. To help convince the legislature that proposals such as this were not necessary, as a newspaper reported at the time, the AAA “changed its mind” about allowing its arbitrators to handle pre-dispute binding arbitrations in health care cases. As the San Francisco Chronicle cited above reported:
After a dispute arises, said Meade, “unless the person says, ‘yes, I do want to be bound by that clause’ and signs a (new) agreement, we will not administer the case.”
The Chronicle wasn’t the only paper to hear these kinds of words from AAA, though. The Los Angeles Times quoted Mr. Meade as saying that “Nothing is more emotional or personal or devastating than a health care problem. If you buy a lemon car, it’s not life or death. It’s not a medical problem. That’s what puts this on a higher playing field.” The Las Vegas Review-Journal quoted him as saying “It’s not fair to ask a person who’s going in for medical treatment to sign an arbitration agreement. Unless a patient indicates they want arbitration after a dispute, we won’t handle it anymore.”
The AAA itself formalized this promise on June 13, 2002, when it issued a press release under the heading, “Cases Involving Patients Must Have Post-Dispute Agreements to Arbitrate.” (AAA Announces Change in Health Care Policy) In that press release, the AAA stated that effective January 1, 2003, the AAA will “no longer accept the administration of cases involving individual patients without a post-dispute agreement to arbitrate.” (Id.) Mr. Meade gave the following as the regarding the reason the AAA chose to adopt this change to its health care policy:
Although we support and administer pre-dispute arbitration in other case areas, we thought it appropriate to change our policy in these cases since medical problems can be life or death situations and require special consideration. (Id.)
Ostensibly, this has remained the AAA’s current policy with respect to health care disputes, as the AAA’s Health Care Policy Statement provides that “it will no longer accept the administration of cases involving individual plaintiffs without a post-dispute agreement to arbitrate.” (Healthcare)
Deja Vu All Over Again: AAA Has Again Decided to Break Its Promise
Unfortunately, it sounds like the AAA has secretly recalled its promise not to administer mandatory pre-dispute binding arbitration in health care cases. I have been provided a copy of a letter that Frank Zotto, Vice President for Case Management for AAA, sent to a number of lawyers in a medical malpractice case on July 13, 2005. It states that “the AAA determined to continue to administer Duke health care disputes....” How can this be? After the AAA beat back legislative action and negative press coverage with solemn declarations that it was done with mandatory arbitration in the health care setting, how could it be handling medical malpractice cases? I’ve searched for stories from the San Francisco Chronicle, the Los Angeles Times and the Las Vegas Review-Journal, and none of them have reported receiving communications from Mr. Meade retracting all of his bold words from 2002.
Mr. Zotto gives three reasons. First, he says, “The Duke Program is optional. Patients could reject the arbitration clause and still receive medical care.” In the real world in which people actually live, however, this is a very flimsy reed. What happens at Duke Hospital is that when a patient is agreeing to have some kind of surgery performed (a time when people tend to feel very vulnerable, and pre-occupied), they are handed a stack of papers and asked to sign them. The arbitration clause is one of those papers. Mr. Zotto may be correct that IF a patient were to closely read the arbitration clause, decide that they didn’t want to sign it, and ask if they could get treatment without signing, that Duke might still provide the surgery. But in reality, how many people facing surgery would ever notice this kind of form, and instead of signing it as asked, insist upon their right not to sign it? Most people would never notice it, would not understand it, and after all, not that many people are exactly Rosa Parks types who stand up to authority figures who are about to hold their lives in their hands. Mr. Zotto’s justification is phony.
And in any case, this answer does not respond to the reasons that AAA itself had earlier given: that it was inappropriate to use pre-dispute arbitration for people facing life and death health decisions (remember all the language quoted above about how the AAA would only use these clauses if people agreed to arbitrate AFTER the dispute arose?).
Mr. Zotto gives a second point: “The Duke Program’s arbitration option is revocable under certain circumstances.” To be honest, I can’t figure out here what Mr. Zotto is talking about. From conversations with several different North Carolina lawyers representing persons who claim that they were seriously injured by Duke Hospital’s negligence, though, I can tell you when Duke’s program is NOT revocable – namely, when the victim of medical malpractice wants to revoke it. In the real world, when someone who is injured by Duke Hospital tries to exercise his or her right to trial by jury, Duke Hospital rushes to court to force arbitration. Notwithstanding some sophistry or over-active imagination by Mr. Zotto, there is nothing meaningfully “revocable” about Duke Hospital’s mandatory pre-dispute binding arbitration clause. In short, there is a word for AAA’s second supposed justification, and the word is “lie.”
Finally, Mr. Zotto says that AAA will enforce the arbitration clause involving Duke Hospital because a court enforced the arbitration agreement, and the AAA “follows court orders.” This explanation is outrageous. Under this theory, the AAA would never follow any of its Consumer Due Process Protocols or other supposed self-imposed restrictions in any case where a defendant could get a court to enforce an agreement that strips individuals of rights. Mr. Zotto’s argument is really a rejection of the entire premise of AAA’s repeated promises that it imposes standards upon itself.
Arbitration service providers such as AAA have the right – and really the duty – to develop and stick to their own ethical principles. For some time, AAA and other major arbitration service providers have stated repeatedly and publicly that they will not administer arbitrations in settings that they deemed to be unfair. For AAA, these statements took the form of their Due Process Protocols and so forth. These protocols were not described to consumers, employees and the public as attempts to summarize the minimum legal requirements that are laid out in court decisions in every jurisdiction, but were set forth as statements of the arbitration firms’ own identity. When AAA has said that it insists upon certain standards of fairness, it has not articulated that insistence as a statement that “the law in all 50 states will bind us to comply with certain rock bottom principles, and we reluctantly agree that we will not go below those even if someone offers us money to do so.” Instead, AAA’s rules of fairness were articulated as a statement of what the organization itself believed was necessary to ensure justice.
AAA is a private actor. It is not obliged to provide services for parties in settings that it considers to be unfair or improper, just because there is some jurisdiction in America that would permit it to do so. There is no requirement that AAA refuse to hold itself to standards above the lowest common denominator, less it be deemed to have acted in a “non-neutral” manner. As just one illustration, look at the case of Overstreet v. Contigroup Companies, Inc., 2006 WL 2424828 (5th Cir. Aug. 23, 2006). In that case, a federal court of appeals enforced an arbitration clause even though it (a) imposed arbitration costs upon an impoverished individual of between $27,500 and $29,000 in order for him to vindicate his claims; and (b) expressly waived all of the individuals claims for exemplary, punitive and consequential damages (even though they otherwise would have been available under the law). Is AAA saying that it would administer such an arbitration in a consumer case if a court would enforce the clause, notwithstanding its Consumer Due Process Protocols? That seems to be the necessary logic of Mr. Zotto’s letter.
If AAA intends not to stand behind its Due Process Protocols except when a court orders it to do so, then it should just go ahead and pull them down off its website, repeal them, and quit praising itself to the media and others about its bold decision to enact them.
When AAA’s Senior Vice President repeatedly publicly stated to reporters across the country in 2002 last fall that it is “inappropriate” for individuals to be forced into pre-dispute arbitration in cases involving health care issues, that moral statement was a recognition of reality and fairness. Mr. Zotto’s recent letter represents a total break with that promise.
A Case Study of How AAA’s Broken Promise Can Harm an Injured Person
Putting aside the broader policy issue of whether it matters if AAA is honest when it makes apparently sweeping and solemn promises to the public, to the media, and to legislatures, does it really matter as a practical matter if AAA breaks its promises? Well, ask a man named Bennie W. Holland. His story is described in an Associated Press story dated September 5, 2006 titled “Man promises to refile lawsuit over dirty surgical instruments.” The story tells how in November 2004, Bennie W. Holland had back surgery at Duke Hospital. After his surgery, Holland learned that he was among a large number of other persons whose “operations may have been performed with instruments mistakenly washed in hydraulic fluid. . . .” Somehow, Duke Hospital personnel apparently got confused, and mixed hydraulic fluid used to operate the hospital's elevators with the system used to wash surgical instruments prior to their use in surgery. In Mr. Holland’s case, this contamination resulted in grave complications from the surgery, including a severe infection, and the temporary loss of kidney and bowel functions. Mr. Holland recently underwent a second surgery on a hip that was affected by Duke’s failure to properly clean its surgical instruments.
Unfortunately for Mr. Holland, though, before his surgery he had signed a pre-dispute arbitration clause designating the AAA to administer any potential claims arising out of Duke’s provision of health care services pursuant to the Health Care Claim Settlement Procedures.
When Mr. Holland went to court to bring claims against Duke for medical malpractice arising out of Duke’s use of contaminated instruments during his surgery, however, Duke rushed to enforce what the AAA’s Mr. Zotto whimsically called Duke’s “revocable” pre-dispute binding arbitration clause. This is precisely the type of “life or death” case that AAA’s Senior Vice President Meade spoke of when he implemented the policy that the AAA would no longer administer health care disputes.
It’s easy to see why Duke Hospital wants to force such a case into arbitration. Experienced lawyers know that, in any given type of case, most AAA arbitrators tend to be lawyers whose principal job is defending companies that might be defendants in similar cases. In other words, if Mr. Holland and his lawyer go forward with arbitration before the AAA, they are likely to receive a list of seven names from the AAA of possible arbitrators, and all or very nearly all of the names on that list will probably be lawyers who work at law firms where they and their partners represent other health care providers in defending against medical malpractice cases. There’s every possibility that an HMO or nursing home defense lawyer is going to view Duke Hospital’s negligence in a case like this less seriously than might a jury of Mr. Holland’s peers.
In 1997, the AAA promised that it wouldn’t handle pre-dispute binding arbitrations of medical cases. It turned out, to put it nicely, that they were “just kidding” when they promised this, and by their own admission, they allowed their arbitrators to handle a number of such cases over the next five years.
In 2002, under pressure from the California legislature and the media, the AAA made the same promise, and assured everyone that this time they weren’t kidding, they really meant it. Once again, unfortunately, the AAA’s actions have fallen far short of their pretty words.
Perhaps the next time the AAA makes a promise to try to stave off serious government action, the legislators won’t be so quick to believe them. And perhaps the next time the AAA makes a series of self-praising statements to reporters about its great restraint, the reporters won’t be so quick to take the AAA at its word.