Outsourcing Justice

NC Supreme Court Invalidates Doctor-Patient Forced Arbitration Clause Based on Novel Defense

In King v. Bryant, No. 294PA14 (N.C. Jan. 27, 2017) (click here for a copy of the decision), the plaintiff sued his doctor for medical malpractice in connection with a hernia surgery.  At the time of the plaintiff’s initial appointment, he was provided with several intake forms as well as an arbitration agreement.

The North Carolina Supreme Court held that the arbitration agreement was unenforceable based on a novel theory.  The premise for the court’s ruling is that a fiduciary relationship existed between the doctor and patient at the time of signing the arbitration agreement.  The court reasoned that the doctor violated his fiduciary duty by presenting the arbitration agreement as part of a larger group of documents and failing to make “full disclosure of the nature and import of the arbitration agreement.”

This case reminds me of New Jersey’s Atalese decision, which requires clear disclosures for arbitration agreements to be enforceable.    Both Atalese and this new King decision appear to single out arbitration agreements by imposing special requirements, and thus, these decisions appear vulnerable under Concepcion’s broad FAA preemption theory.  However, the North Carolina Supreme Court provided a good explanation why FAA preemption arguably would not apply here.  The court explained that the same heightened disclosure requirements would apply in this fiduciary context to agreements to waive liability, agreements to waive doctor-patient confidentiality, or any other agreements that impacted the patient’s substantive rights.  (Also, the defendant doctor had failed to demonstrate that interstate commerce was involved, and thus it was not clear the FAA applied.)

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