In its opinion filed on January 27, 2017, the Supreme Court of North Carolina (“North Carolina Supreme Court”) held that an arbitration agreement provided by a surgeon to a new patient who signed it two weeks before his surgery was unenforceable due to the surgeon’s breach of fiduciary duty owed to the patient and therefore the surgeon could not compel arbitration of the patient’s subsequent North Carolina medical malpractice lawsuit that alleged that the surgeon breached the standard of care in performing the surgery that caused the patient to suffer significant injuries.
The Underlying Facts
The plaintiff was scheduled to undergo a bilateral inguinal hernia repair to be performed by the defendant surgeon on May 14, 2009. At the time of his initial appointment with the defendant surgeon, the plaintiff was presented with an Agreement to Alternative Dispute Resolution (“arbitration agreement”) that the surgeon’s office routinely presented to new patients along with other documents prior to the first occasion on which a patient met with a physician.
The plaintiff alleged that he was provided the initial intake forms that requested personal and medical history information and to sign the signature lines on all of the forms, including the arbitration agreement. The plaintiff alleged that he was then provided with a second set of documents, which addressed insurance and payment-related issues, after he had met with the defendant surgeon. The plaintiff acknowledged that he did not read any of the documents that he signed after his initial meeting with the defendant surgeon and stated that he had believed them to be just a formality. The plaintiff received a copy of the arbitration agreement on the day that it was signed but asserted that the contents of the arbitration agreement were not clear to him even after he had read it. The plaintiff contended that if the arbitration agreement had been brought to his attention and he had been told signing it was optional, he would not have signed it.
In the course of performing the hernia repair on the plaintiff, the defendant surgeon injured the plaintiff’s distal abdominal aorta, resulting in abdominal bleeding. Although the defendant surgeon was able to repair the plaintiff’s injury, the necessary remedial procedures led to occlusion of an artery, a thromboembolism to the plaintiff’s right lower leg, and acute ischemia in the plaintiff’s right foot. After undergoing an immediate revascularization procedure to attempt to salvage his right leg, the plaintiff remained hospitalized until May 26, 2009. At the time of his discharge from the hospital, the plaintiff continued to suffer from complications related to his abdominal aortic injury and needed additional treatment. As a result of the injury that he sustained during the hernia repair procedure, the plaintiff incurred unexpected medical expenses, abdominal scarring, lost wages, numbness, and a limited ability to use his right leg and foot.
The plaintiff filed his North Carolina medical malpractice lawsuit on September 28, 2011. On November 7, 2011, the defendant surgeon filed a motion seeking to have further litigation stayed and to enforce the arbitration agreement that had been entered into between the plaintiff and the defendant surgeon. The trial court denied the defendant’s request to compel arbitration and the defendant appealed. The North Carolina Court of Appeals decided issues involved the case on two separate occasions, remanding the case back to the trial court on the issue whether a physician-patient relationship existed at the time that the plaintiff signed the arbitration agreement.
In the most recent appeal to the North Carolina Supreme Court, the North Carolina Supreme Court stated that the proper resolution of this case hinges upon the nature of the relationship that existed between the plaintiff and the defendant surgeon at the time that the arbitration agreement was signed, and that this case is most properly understood as revolving around the issue of whether a fiduciary relationship existed between the plaintiff and the defendant surgeon, independent of the existence of a physician-patient relationship at the time that the plaintiff signed the arbitration agreement.
The North Carolina Supreme Court stated that in general terms, a fiduciary relation is said to exist wherever confidence on one side results in superiority and influence on the other side; where a special confidence is reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing the confidence. If a fiduciary relationship is found to exist, the fiduciary is held to a standard stricter than the morals of the market place. Liability for breach of fiduciary duty is based on the taking advantage of a confidential relationship rather than a specific misrepresentation.
As a result, where a relation of trust and confidence exists between the parties, there is a duty to disclose all material facts and failure to do so constitutes a breach of fiduciary duty. However, before liability for breach of fiduciary duty can exist, it must be shown that the defendant sought to benefit himself at the expense of the other party.
In the case the North Carolina Supreme Court was deciding, the plaintiff was referred to the defendant surgeon by his family practitioner for the purpose of having a hernia repair procedure performed. Individuals consult with surgeons, like they do with other physicians, because such persons possess special knowledge and skill in diagnosing and treating diseases and injuries, which the patient lacks; accordingly, the patient has sought and obtained the services of the physician because of such special knowledge and skill.
Upon arrival at the defendant surgeon’s office, the plaintiff was presented with a collection of documents, including the arbitration agreement, and asked to complete them. The majority of the documents that the plaintiff was requested to complete and sign involved the provision of medical information, which is inherently sensitive and confidential in nature, for the defendant surgeon’s use in determining whether to accept the plaintiff as a patient and in determining how he should be treated. No one directed the plaintiff’s attention to the arbitration agreement, which was only one of a number of documents presented to him on that occasion, or made any attempt to explain the ramifications that would result from any decision on his part to sign it. After the plaintiff completed and signed these documents and met with the defendant surgeon, the defendant surgeon agreed to assume responsibility for providing the plaintiff with medical care and treatment.
The North Carolina Supreme Court’s Holdings
The North Carolina Supreme Court held that regardless of whether a physician-patient relationship existed between the plaintiff and the defendant surgeon at the time that the arbitration agreement was signed, there was a confidential relationship between them at that point. Before the plaintiff even saw the defendant surgeon, he demonstrated sufficient trust and confidence in him to provide the defendant surgeon with confidential medical information. Unlike the defendant surgeon, the plaintiff had received a limited education and had little to no experience interpreting legal documents. As a result, the North Carolina Supreme Court held that a fiduciary relationship existed between the plaintiff and the defendant surgeon at the time that the plaintiff signed the arbitration agreement.
The North Carolina Supreme Court further held that the defendant surgeon violated his fiduciary duty to the plaintiff by failing to make full disclosure of the nature and import of the arbitration agreement to him at or before the time that it was presented for his signature. Instead of specifically bringing this agreement, which substantially affected his legal rights in the event that an untoward event occurred during the course of the treatment that he received from the defendant surgeon, to the plaintiff’s attention and explaining it to him, the defendant surgeon presented the plaintiff with the arbitration agreement, which, at a minimum, could have been worded more clearly, in a collection of documents, thereby creating the understandable impression that the arbitration agreement was simply another routine document that the plaintiff needed to sign in order to become a patient. Moreover, the defendant surgeon benefitted from the plaintiff’s action in signing the arbitration agreement by ensuring that any subsequent dispute between the parties would be resolved using the forum, procedures, and decision makers of the defendant surgeon’s choice.
The North Carolina Supreme Court also held that its decision to refrain from enforcing the arbitration agreement at issue in this case is not precluded by the doctrine of federal preemption.
King v. Bryant, No. 294PA14-1.
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