An Arbitration Agreement That Attempts to Skew a Statutory Arbitration Scheme Is Void as Against Public Policy
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Federal public policy favors arbitration and the broad interpretation and enforcement of arbitration agreements. So how can an arbitration agreement be held by a court to be void as against public policy? One answer from a state court (in circumstances where the Federal Arbitration Act did not apply) is that toying with a statutory arbitration scheme could do the trick.
In Hernandez v. Crespo, No. SC15-67, 2016 Fla. LEXIS 2718 (Fla. Dec. 22, 2016), the Supreme Court of Florida held that a physician-patient arbitration agreement that seemed to adopt the arbitration provisions of the state’s Medical Malpractice Act (“MMA”), Fla. Stat. Ann. § 766.207-212, was void as against public policy because it actually created a heavily imbalanced arbitration scheme by contracting around most of the patient-friendly statutory terms.
The arbitration agreement in question purported to adopt the MMA’s arbitration provisions, but with carve-outs that produced significant advantages for the physicians. Hence, while the patients gave up their right to jury trial by agreeing to arbitrate, they did not receive the benefits that the statutory scheme provided in exchange. For example, (1) the MMA required that the physician concede liability in exchange for a cap of $250,000 on non-economic damages, but the agreement imposed the damages cap without any concession of liability; and (2) the MMA required a panel of three independent arbitrators, one of whom must be an administrative law judge, but the agreement did not require independent arbitrators, and instead allowed each party to appoint an arbitrator (with the party-appointed arbitrators appointing the panel chairman), and if the patient failed to appoint an arbitrator within 20 days, the physician was effectively empowered to appoint a majority of the arbitrators. Also, contrary to the MMA, the agreement (3) provided for equal sharing of costs by the parties rather than requiring the physician to assume most costs; (4) did not provide for payment of interest on damages; (5) did not require joint and several liability of defendants; and (6) in effect excluded the right of appeal. See 2016 Fla. LEXIS 2718, at *15-17.
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