Morris v. Metriyakool , 418 Mich. 423 ( 1984 )

Kavanagh, J.

These cases concern arbitration of medical malpractice claims. The most significant issue presented is whether the malpractice arbitration act of 1975, MCL 600.5040 et seq.; MSA 27A.5040 et seq., deprives plaintiffs of constitutional rights to an impartial decisionmaker. We hold that it does not.

Plaintiff Diane Jackson was treated in November, 1977, at defendant Detroit Memorial Hospital by defendant Dr. William J. Bloom for a dental malady. At that time, plaintiff agreed to submit to arbitration "any claims or disputes (except for disputes over charges for services rendered) which may arise in the future out of or in connection with the health care rendered to me * * * by this hospital, its employees and those of its independent staff doctors and consultants who have agreed to arbitrate”. In August, 1979, plaintiff brought action for malpractice against defendants in the Wayne Circuit Court. Defendants moved for accelerated judgment, on the basis of the agreement to arbitrate. After a hearing, the court found the act constitutional and, finding no duress, mistake, or incompetency in the execution of the agreement, granted defendants’ motion.

The Court of Appeals reversed, holding that MCL 600.5044(2); MSA 27A.5044(2) violates the constitutional guarantee of due process by " 'forcing the litigant to submit his or her claim to a tribunal which is composed in such a way that a high probability exists that such tribunal will be biased against the claimant without mandating the use of an arbitration form explicitly detailing the nature of the panel’s makeup’ ”. Jackson v Detroit Memorial Hospital, 110 Mich App 202, 204; 312 NW2d 212 (1981), quoting Morris v Metriyakool, 107 Mich App 110, 134; 309 NW2d 910 (1981) (Bronson, J., dissenting in part and concurring in part). The Court also held that the arbitration agreement is not a contract of adhesion and that, on the present facts, it is not unconscionable. Defendants applied for leave to appeal, and plaintiffs sought leave to cross-appeal, which we granted. 412 Mich 885 (1981).

In the second case before us, plaintiff Delores M. Morris was admitted to defendant South Macomb Hospital on November 9, 1976. At the time of her admission, plaintiff executed an agreement similar to the one executed by plaintiff Jackson to arbitrate any claims against defendant hospital and defendant Dr. S. Metriyakool arising out of her treatment for a hysterectomy. Subsequently, plaintiff brought suit against defendants alleging negligence in the surgical procedure, which caused her to develop peritonitis, and negligence in failing to promptly diagnose and treat the condition. Defendants each moved to submit plaintiff’s claims to arbitration in accordance with the agreement. The trial court dismissed plaintiff’s complaint with prejudice, but without prejudice to her right to file a claim for arbitration.

The Court of Appeals rejected plaintiff’s argument that the composition of the arbitration panel was unconstitutionally biased. It also held that the act does not unconstitutionally or unconscionably deprive a patient of a meaningful opportunity to decide whether to relinquish access to a court and a jury trial. The Court further held that the agreement was not a contract of adhesion. Judge Bronson dissented from the holding of constitutionality. Morris v Metriyakool, supra. We granted plaintiff’s application for leave to appeal. 412 Mich 884 (1981).

The malpractice arbitration act provides that a patient "may, if offered, execute an agreement to arbitrate a dispute, controversy, or issue arising out of health care or treatment by a health care provider”, MCL 600.5041(1); MSA 27A.5041(1), or by a hospital, MCL 600.5042(1); MSA 27A.5042(1). A patient executing such an agreement with a health-care provider may revoke it within 60 days after execution, MCL 600.5041(3); MSA 27A.5041(3), or, in the case of a hospital, within 60 days after discharge, MCL 600.5042(3); MSA 27A.5042(3), options which must be stated in the agreement. All such agreements must provide in 12-point boldface type immediately above the space for the parties’ signatures that agreement to arbitrate is not a prerequisite to the receipt of health care. MCL 600.5041(5), 600.5042(4); MSA 27A.504K5), 27A.5042(4).

For those who have elected arbitration, the act requires a three-member panel composed of an attorney, who shall be chairperson, a physician, preferably from the respondent’s medical specialty, and a person who is not a licensee of the healthcare profession involved, a lawyer, or a representative of a hospital or an insurance company. MCL 600.5044(2); MSA 27A.5044(2). Where the claim is against a hospital only, a hospital administrator may be substituted for the physician. If the claim is against a health-care provider other than a physician, a licensee of the health-care profession involved shall be substituted.

Defendants Detroit Memorial Hospital and Dr. Bloom appeal from the holding that the presence of the medical member unconstitutionally created a biased panel. First, they argue that because the state does not compel arbitration, but only regulates it, state action is not involved.

A basic requirement of due process is a "fair trial in a fair tribunal”. In re Murchison, 349 US 133, 136; 75 S Ct 623; 99 L Ed 942 (1955); Withrow v Larkin, 421 US 35, 46; 95 S Ct 1456; 43 L Ed 2d 712 (1975). Essential to this notion is a fair and impartial decisionmaker. Crampton v Dep’t of State, 395 Mich 347, 351; 235 NW2d 352 (1975). The Due Process Clause, US Const, Am XIV; Const 1963, art 1, § 17, limits state action. Dow v State of Michigan, 396 Mich 192, 202; 240 NW2d 450 (1976). Private conduct abridging individual rights does not implicate the Due Process Clause unless to some significant extent the state, in any of its manifestations, has been found to have become involved in it, see Burton v Wilmington Parking Authority, 365 US 715; 81 S Ct 856; 6 L Ed 2d 45 (1961), or to have compelled the conduct, Flagg Bros, Inc v Brooks, 436 US 149, 164; 98 S Ct 1729; 56 L Ed 2d 185 (1978). See also Jackson v Metropolitan Edison Co, 419 US 345; 95 S Ct 449; 42 L Ed 2d 477 (1974).

We find it unnecessary, however, to determine here whether the state has significantly involved itself in the challenged action because, even if we were to find so, we have concluded that the composition of the arbitration panel does not offend guarantees of due process.

In holding the act unconstitutional, the Court of Appeals in Jackson agreed with Judge Bronson’s partial dissent in Morris that the arbitration panel presents too high a probability of actual bias to be constitutionally tolerable. In his partial dissent in Morris, Judge Bronson found the statute creating the panel unconstitutional because the medical member of the arbitration panel had such an interest in the outcome that there is too great a risk that he will not be impartial. Judge Bronson cited two affidavits submitted in Morris from malpractice insurance underwriters. They averred that any hospital administrator or physician would have a direct and substantial interest in the outcome of arbitrated cases because the cost and availability of medical malpractice insurance would be affected. Judge Bronson also said that the act in question is supported by health-care professionals, which indicates that they believe they will fare better under this type of system. He also concluded that anti-plaintiff attitudes exist among large numbers of doctors. "Their 'function and frame of reference’ may be expected to make them partisans of their professional colleagues.” Morris, 107 Mich App 129 (Bronson, J., dissenting in part and concurring in part).

No showing of actual bias on the part of a particular arbitration panel is claimed, the parties having appealed from motions for accelerated judgment and no arbitration panel having been convened. That does not prevent a party from claiming that the risk of actual bias is too high to be constitutionally tolerable. "[0]ur system of law has always endeavored to prevent even the probability of unfairness.” Murchison, supra, 349 US 136. "In pursuit of this end, various situations have been identified in which experience teaches that the probability of actual bias on the part of the judge or decisionmaker is too high to be constitutionally tolerable.” Withrow, supra, 421 US 47. Included in those situations is that of a decision-maker who has a direct or substantial pecuniary interest in the outcome of the controversy. E.g., Gibson v Berryhill, 411 US 564; 93 S Ct 1689; 36 L Ed 2d 488 (1973); see Crampton, supra, 395 Mich 351-355.

Such a pecuniary interest is claimed here — the decisionmaker’s interest in lower malpractice insurance premiums will influence his decision towards reducing the number and size of malpractice awards. In their affidavits, the underwriters averred that physicians and hospital administrators have a vested interest in the medical malpractice claims made against others; the claims made do aifect the rate of insurance premiums and the availability of insurance. Premium rates for all doctors, they averred, are generally determined by the number of all claims, settlements, and judgments against physicians and hospitals in Michigan. The effect of an arbitration award on insurance rates is thus said to be direct and substantial.

This situation is aggravated, contends plaintiff Jackson, by the composition of the advisory committee, which selects the pool of candidates from which all members of the arbitration panel are chosen. The statute provides:

"An arbitration advisory committee is created within the bureau of insurance and shall be appointed by the commission and shall consist of 18 members. One-half of the advisory committee shall be broadly composed of licensed physicians and other health care providers, licensed hospital or institutional health care providers, malpractice insurance carriers and licensed legal practitioners. One-half shall be broadly composed of nongovernmental, nonlawyer, nonhealth care provider, and noninsurance carrier persons. The committee may appoint 1 or more specialized subcommittees with the approval of the commissioner.” MCL 500.3054; MSA 24.13054.

The medical part of the committee, which includes the malpractice insurance carriers and health-care providers, has a direct interest in reducing the number and size of malpractice awards. There is a substantial possibility, plaintiff Jackson insists, that they will select candidates who are similarly inclined.

All that has been shown here with any degree of certainty is that there is a relationship between the number and size of malpractice awards on the one hand, and the cost and availability of malpractice insurance on the other. This may be taken for granted. It may also be assumed that, because physicians and hospital administrators are concerned with the cost and availability of malpractice insurance, they are members of a class which is affected by the decision in a case between other parties. See Tumey v Ohio, 273 US 510, 522; 47 S Ct 437; 71 L Ed 749; 50 ALR 1243 (1927). More than that must be shown, however, to make out a case which offends due process.

In Tumey, the village mayor was disqualified from sitting as a judge where he was compensated from fines imposed for violation of the state prohibition act. The Court concluded that the mayor "had a direct, personal, pecuniary interest in convicting the defendant who came before him for trial, in the twelve dollars of costs imposed in his behalf, which he would not have received if the defendant had been acquitted.” Tumey, p 523.

In Ward v Monroeville, 409 US 57; 93 S Ct 80; 34 L Ed 2d 267 (1972), although the mayor was not directly compensated from fines imposed for traffic offenses, he held wide executive powers and was responsible for village finances. The Court disqualified the mayor from sitting as a judge because the mayor’s executive responsibilities for village finances might have made him partisan to maintain the high level of contribution from the may- or’s court. Revenue from fines, costs, and fees collected in the mayor’s court annually contributed almost half of the total village revenues.

Also, in Gibson, supra, the Court affirmed the district court’s finding that the Alabama Board of Optometry was biased and could not provide a fair and impartial hearing to optometrists charged with unprofessional conduct for working for a corporation. The board was composed solely of independent doctors not employed by corporations. The Court held that the board had a substantial pecuniary interest in the proceedings because what was sought was the revocation of the licenses of nearly half of all optometrists in the state which, if successful, would possibly redound to the personal benefit of members of the board.

In the present case, by contrast, it has not been demonstrated that the medical members of these panels have a direct pecuniary interest or that their decision may have any substantial effect on the availability of insurance or insurance premiums. We have been shown no grounds sufficient for us to conclude that these decisionmakers will not act with honesty and integrity. We look for a pecuniary interest which creates a probability of unfairness, a risk of actual bias which is too high to be constitutionally tolerable. It has not been shown here.

Plaintiff Jackson also argues that as a class physicians and hospital administrators possess a subliminal bias against patients who claim medical malpractice.

We interpret this as a claim made out under Crampton, supra. In Crampton, we held that the probability of actual bias was too high where a prosecutor and a police officer sat on an appeal board to review the revocation of Crampton’s driver’s license for refusal to submit to a chemical test upon arrest for driving under the influence of intoxicating liquor. Police officers and prosecutors are full-time law enforcement officials, we said, deeply and personally involved in the fight against law violators. "[T]hey are identified and aligned with the state as the adversary of the citizen who is charged with violation of the law. Their function and frame of reference may be expected to make them 'partisan to maintain’ their own authority and that of their fellow officers.” Crampton, supra, 395 Mich 357.

We do not believe that the medical members of these panels are so identified and aligned with respondents in malpractice cases that they may be expected to favor the respondents. Physicians and other health care professionals are trained in the medical arts and are oath-bound to treat the ill. Hospital administrators are trained in the proper functioning of hospitals. Neither physicians nor hospital administrators have professional interests that are adverse to patients or even malpractice claimants on a consistent, daily basis. Any identity of interest with respondents is not so strong as to create a subliminal bias for one side and against the other.

"All questions of judicial qualification may not involve constitutional validity. Thus matters of kinship, personal bias, state policy, remoteness of interest, would seem generally to be matters merely of legislative discretion.” Tumey, supra, 273 US 523. We are not persuaded that these arbitration panels deprive plaintiffs of fair and impartial decisionmaking.

Plaintiffs next argue that the arbitration agreement waives constitutional rights to a jury trial and access to a court. Because these fundamental rights are waived, they say, the burden should rest with the defendants to show a valid contract, which they can only do by showing that the waiver was made voluntarily, knowingly, and intelligently. The burden of showing a voluntary waiver is not an easy one, argue plaintiffs, because the arbitration agreement was offered at the time of admission to the hospital in an atmosphere infected with implicit coercion. Additionally, plaintiffs argue that a knowing and intelligent waiver will not be easily shown because the defendants are chargeable with constructive fraud. Constructive fraud is said to arise out of the agreement’s failure to highlight the fact of waiver, failure to disclose the composition of the arbitration panel (even though this information is contained in an informational booklet accompanying the agreement), and failure to disclose the attitudes of physicians in general, that they and hospital administrators may be biased and the reasonable probability that insurance rates are affected by awards.

The defendants respond that we should not consider any of these arguments because they were not raised in the lower courts. The only issues properly preserved for appeal, defendants argue, besides the due process question about the panel’s composition, are whether the arbitration agreement is a contract of adhesion and whether it is unenforceable as unconscionable.

Some of the issues briefed by plaintiffs are raised for the first time in this appeal. Ordinarily we would not consider these questions, but, because the same or similar issues are pending in other cases in the lower courts, we address plaintiffs’ contentions. Johnston v Michigan Consolidated Gas Co, 337 Mich 572, 580; 60 NW2d 464 (1953).

Answering the merits of plaintiffs’ questions, defendants contend that arbitration is a matter of contract and that one who signs a written agreement is presumed to understand it. The act presumes a conforming agreement to be valid, MCL 600.5041(7), 600.5042(8); MSA 27A.5041(7), 27A.5042(8). Therefore, the burden of disproving this arbitration agreement rests with plaintiffs. Moreover, say defendants, the burden of establishing a constitutional violation rests with the party asserting it. The arbitration agreement and informational booklet reasonably indicated that arbitration was an exclusive alternative to trial by jury. Plaintiffs expressly waived their rights to trial by jury. Arbitration is voluntary and not required, which the agreement plainly states in capital letters above the signature. The form of the agreement and the information booklet is strictly controlled, MCL 500.3053, 500.3060, 600.5041, 600.5042; MSA 24.13053, 24.13060, 27A.5041, 27A.5042, and was approved by the Michigan Commissioner of Insurance.

Plaintiffs, contend defendants, have failed to demonstrate that they were coerced into signing the agreement. Answering the argument of constructive fraud, defendants say that the information booklet given to plaintiffs states that a doctor or hospital administrator serves on the arbitration panel. A chart in the booklet also states that a court case is heard by a judge and jury while an arbitration case is heard by the three-member panel.

We reject plaintiffs’ allocation of the burden of proof to defendants. The burden of avoiding these arbitration agreements, as with other contracts, rests with those who would avoid them. The act states that an agreement to arbitrate which includes the statutory provisions shall be presumed valid. MCL 600.5041(7), 600.5042(8); MSA 27A.504K7), 27A.5042(8).

The burden of showing some ground for rescinding or invalidating a contract is not altered merely because the contract entails eschewal of constitutional rights. Plaintiffs’ allegations of coercion, like other contract defenses of mistake, duress, and fraud, must be proven by the party seeking to avoid the contract on such grounds.

Plaintiff Jackson contends that the arbitration agreement is a contract of adhesion, the terms of which exceeded her reasonable expectations. She claims that by not stating explicitly that court access with the right to jury trial was waived, this fact was in effect concealed and hence the contract is unconscionable.

Contracts of adhesion are characterized by standardized forms prepared by one party which are offered for rejection or acceptance without opportunity for bargaining and under the circumstances that the second party cannot obtain the desired product or service except by acquiescing in the form agreement. Steven v Fidelity & Casualty Co of New York, 58 Cal 2d 862, 879; 27 Cal Rptr 172; 377 P2d 284 (1962), see Allen v Michigan Bell Telephone Co, 18 Mich App 632; 171 NW2d 689 (1969), lv den 383 Mich 804 (1970), Zurich Ins Co v Rombough, 384 Mich 228, 232-233; 180 NW2d 775 (1970) , and cf. Cree Coaches, Inc v Panel Suppliers, Inc, 384 Mich 646, 649; 186 NW2d 335 (1971). Regardless of any possible perception among patients that the provision of optimal medical care is conditioned on their signing the arbitration agreement, we believe that the sixty-day rescission period, of which patients must be informed, fully protects those who sign the agreement. The patients’ ability to rescind the agreement after leaving the hospital allows them to obtain the desired service without binding them to its terms. As a result, the agreement cannot be considered a contract of adhesion.

We also reject plaintiffs claim that the arbitration agreement is unconscionable. According to the record before us, the arbitration agreement signed by plaintiff Jackson is six paragraphs long. The first sentence of the first paragraph begins, "I understand that this hospital and I by signing this document agree to arbitrate any claims or disputes”. The first two sentences of the second paragraph state:

"I understand that Michigan Law gives me the choice of trial by judge or jury or of arbitration. I understand that arbitration is a procedure by which a panel that is either mutually agreed upon or appointed decides the dispute rather than a judge or jury.”

This was not a long contract covering different terms, only one of which, obscured among many paragraphs, concerned arbitration. Arbitration was the essential and singular nature of the agreement. We do not believe that an ordinary person signing this agreement to arbitrate would reasonably expect a jury trial. We also reject plaintiffs’ argument that the agreement is unconscionable for failure to highlight these terms. See Williams v Walker-Thomas Furniture Co, 121 US App DC 315, 319; 350 F2d 445; 18 ALR3d 1297 (1965).

Finally, both plaintiffs ask that we find constructive fraud and hold that the agreements are unconscionable because of failure of the contracts to disclose the composition of the panel, the attitudes of physicians, the fact that the medical member of the panel may be intrinsically biased against plaintiffs, and the reasonable probability that malpractice rates are affected by awards in medical malpractice cases.

We decline. We do not believe that the agreements are unconscionable for failing to include plaintiffs’ recommendations. Nor do we believe that defendants have breached a legal or equitable duty which has had the effect of deceiving plaintiffs, nor have defendants received an unmerited benefit. Goodrich v Waller, 314 Mich 456, 462; 22 NW2d 862 (1946).

In Jackson, we reverse the finding of unconstitutionality and reinstate the order of the trial court submitting the matter to arbitration.

In Morris, we affirm.

No costs, a public question.

Levin, J., concurred with Kavanagh, J.