The Blue Ribbon Panel
The genesis of this Advisory Panel was the decision of the California
Supreme Court in Engalla vs. Permanente.2 In harsh terms, the court criticized the
Kaiser Permanente3 arbitration plan for failing to guarantee the rapid appointment of
a neutral arbitrator. The Court also observed that the average time taken to
conclude most arbitrations was too long and inconsistent with Kaiser Permanente's
promise to its members of a speedy process...
During this process, we were also drawn into a brief examination of the ways
in which medical malpractice might be avoided and how dispute resolution
procedures affect quality assurance in the medical setting. While not part of our
mandate, we were impressed with some of the work in this field.10 The approach is
based on the notion that the traditional fault-finding method of our court system and
traditional arbitration might not be the best way to prevent the occurrence of
medical malpractice.
Those interested in this field suggest that an alternative is to
develop an environment where blame is avoided, the duty to report mistakes is
taken for granted and ways are found to change the medical system to avoid
the mistakes in the future.
It would be of immense value if Kaiser Permanente would expand its efforts in
this area...
Kaiser Permanente is California's single biggest HMO user of binding
arbitration to resolve malpractice claims.11 This practice started in 1971 and its use
today is the universal form of required dispute resolution for Kaiser Permanente.
Even more singular, the Health Plan contracts to defend and indemnify the
physicians and Permanente Medical Groups for medical malpractice. Given the
current national and California efforts to impose health plan liability, it is worth
noting that Kaiser Permanente already assumes that contractual obligation...
Arbitration Statistics - California Division
Professional Liability Clams by Calendar Year
Chart 1:
Number of Demands
for Arbitration and
Summons & Complaints
1992 1993 1994 1995 1996 1997*
855 822 819 886 958 973
No. of Settlements
306 302 315 249 304 264
No. of Abandonment/ Dismissals
227 476 502 512 490 635
No of Arbitrations
88 126 134 117 151 105
...This rotation would diminish the reliance of any one set of neutral arbitrators for
Kaiser Permanente cases and should decrease the risk and perception of possible
"repeat player" bias towards Kaiser Permanente by neutral arbitrators...Disclosures by
potential arbitrators
20) The Independent Administrator should maintain a list of all
qualified neutral arbitrators and arbitration organizations and maintain a file
on each. An individual neutral arbitrator's file should contain the history of
the arbitrator's rulings in Kaiser arbitrations, written decisions (if any) in
those cases, a biography and any additional information necessary to enable
parties to screen for bias and possible conflicts of interest.
21) These files should be made available to parties and counsel in
pending Kaiser Permanente arbitrations. When a list of potential neutral
arbitrators is sent to parties and counsel, a summary of the file information on
the proposed neutral arbitrators should be included in that mailing.
Rationale: A major criticism of the Kaiser Permanente arbitration system has been
that Kaiser Permanente, as the repeat party, has greater knowledge of the past
performance of potential neutral arbitrators.
Protection of privacy
24) In developing principles to govern the Independent
Administrator and the neutral arbitrators who will serve in Kaiser
Permanente cases, Kaiser Permanente and the Advisory Committee should
give substantial care to ensure the privacy of members, physicians and Kaiser
personnel. Prior to making past awards and written decisions available, as
recommended above, the Independent Administrator should remove the names
of parties, members, physicians and Kaiser Permanente personnel, as well as
the name and location of the Kaiser facility.
Rationale: A major benefit of arbitration is the privacy it provides to Kaiser
members and Kaiser Permanente personnel. The goal of providing substantially
more information on past cases to counsel and parties selecting arbitrators in
pending cases could undermine the goal of maintaining party privacy. Therefore,
the Panel recommends that any information that could be used to identify an
individual party be removed from documents placed in the Independent
Administrator's files for review.
...In addition, some plaintiffs'
counsel believe that Kaiser Permanente is sometimes reluctant to have early
settlement discussions. The Panel does not know if this criticism is valid, but
believes that increasing opportunities for settlement talks will benefit all parties...
The genesis of this Advisory Panel was the decision of the California
Supreme Court in Engalla vs. Permanente.2 In harsh terms, the court criticized the
Kaiser Permanente3 arbitration plan for failing to guarantee the rapid appointment of
a neutral arbitrator. The Court also observed that the average time taken to
conclude most arbitrations was too long and inconsistent with Kaiser Permanente's
promise to its members of a speedy process...
During this process, we were also drawn into a brief examination of the ways
in which medical malpractice might be avoided and how dispute resolution
procedures affect quality assurance in the medical setting. While not part of our
mandate, we were impressed with some of the work in this field.10 The approach is
based on the notion that the traditional fault-finding method of our court system and
traditional arbitration might not be the best way to prevent the occurrence of
medical malpractice.
Those interested in this field suggest that an alternative is to
develop an environment where blame is avoided, the duty to report mistakes is
taken for granted and ways are found to change the medical system to avoid
the mistakes in the future.
It would be of immense value if Kaiser Permanente would expand its efforts in
this area...
Kaiser Permanente is California's single biggest HMO user of binding
arbitration to resolve malpractice claims.11 This practice started in 1971 and its use
today is the universal form of required dispute resolution for Kaiser Permanente.
Even more singular, the Health Plan contracts to defend and indemnify the
physicians and Permanente Medical Groups for medical malpractice. Given the
current national and California efforts to impose health plan liability, it is worth
noting that Kaiser Permanente already assumes that contractual obligation...
Arbitration Statistics - California Division
Professional Liability Clams by Calendar Year
Chart 1:
Number of Demands
for Arbitration and
Summons & Complaints
1992 1993 1994 1995 1996 1997*
855 822 819 886 958 973
No. of Settlements
306 302 315 249 304 264
No. of Abandonment/ Dismissals
227 476 502 512 490 635
No of Arbitrations
88 126 134 117 151 105
...This rotation would diminish the reliance of any one set of neutral arbitrators for
Kaiser Permanente cases and should decrease the risk and perception of possible
"repeat player" bias towards Kaiser Permanente by neutral arbitrators...Disclosures by
potential arbitrators
20) The Independent Administrator should maintain a list of all
qualified neutral arbitrators and arbitration organizations and maintain a file
on each. An individual neutral arbitrator's file should contain the history of
the arbitrator's rulings in Kaiser arbitrations, written decisions (if any) in
those cases, a biography and any additional information necessary to enable
parties to screen for bias and possible conflicts of interest.
21) These files should be made available to parties and counsel in
pending Kaiser Permanente arbitrations. When a list of potential neutral
arbitrators is sent to parties and counsel, a summary of the file information on
the proposed neutral arbitrators should be included in that mailing.
Rationale: A major criticism of the Kaiser Permanente arbitration system has been
that Kaiser Permanente, as the repeat party, has greater knowledge of the past
performance of potential neutral arbitrators.
Protection of privacy
24) In developing principles to govern the Independent
Administrator and the neutral arbitrators who will serve in Kaiser
Permanente cases, Kaiser Permanente and the Advisory Committee should
give substantial care to ensure the privacy of members, physicians and Kaiser
personnel. Prior to making past awards and written decisions available, as
recommended above, the Independent Administrator should remove the names
of parties, members, physicians and Kaiser Permanente personnel, as well as
the name and location of the Kaiser facility.
Rationale: A major benefit of arbitration is the privacy it provides to Kaiser
members and Kaiser Permanente personnel. The goal of providing substantially
more information on past cases to counsel and parties selecting arbitrators in
pending cases could undermine the goal of maintaining party privacy. Therefore,
the Panel recommends that any information that could be used to identify an
individual party be removed from documents placed in the Independent
Administrator's files for review.
...In addition, some plaintiffs'
counsel believe that Kaiser Permanente is sometimes reluctant to have early
settlement discussions. The Panel does not know if this criticism is valid, but
believes that increasing opportunities for settlement talks will benefit all parties...
The health care institution commonly known as "Kaiser" is actually a combination of
organizations. First, the Kaiser Foundation Health Plan, Inc. is a California nonprofit
health
benefit corporation, and a federally qualified HMO. The Health Plan arranges for
medical benefit by contracting exclusively with The Permanente Medical Group, Inc.
(Northern California) and the Southern California Permanente Medical Group. Hospital
services are provided by contract with Kaiser Foundation Hospitals, another California
nonprofit public benefit corporation.
The Health Plan, Kaiser Foundation Hospitals and the Medical Groups work
collaboratively as the Kaiser Permanente Medical Care Program or 'Kaiser
Permanente."
organizations. First, the Kaiser Foundation Health Plan, Inc. is a California nonprofit
health
benefit corporation, and a federally qualified HMO. The Health Plan arranges for
medical benefit by contracting exclusively with The Permanente Medical Group, Inc.
(Northern California) and the Southern California Permanente Medical Group. Hospital
services are provided by contract with Kaiser Foundation Hospitals, another California
nonprofit public benefit corporation.
The Health Plan, Kaiser Foundation Hospitals and the Medical Groups work
collaboratively as the Kaiser Permanente Medical Care Program or 'Kaiser
Permanente."
KAISERPAPERS.OR
Mandatory arbitration is a private proceeding in which there is no public record or
judicial appeal, and arbitrators are often biased in favor of the HMO. Kaiser failed to
follow state law requiring the HMO to disclose to enrollees that they were giving up their
right to go to court in case of a dispute. Because of this failure, a court found that the
HMO's arbitration provision was not enforceable. Yedalian's suit forced Kaiser to disclose
to patients considering a medical malpractice claim that they may not be bound to
arbitration. After the document filed today is signed by the court, the action will be
dismissed and the court will retain jurisdiction over the case to ensure that the settlement
is enforced and Kaiser informs patients of their rights.
http://legalstuff.kaiserpapers.org/arbitrationnot.html
It is important that you get a copy of your medical records immediately if you are
considering arbitration with Kaiser. Get them before Medical Legal re-writes
them!.
http://www.harp.org/recordmethod.htm
"They don't want to diagnose or treat Lyme disease, because it is very costly to diagnose
and treat. Kaiser has a system where you can't sue them if you are misdiagnosed,
so it just doesn't care."
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/archive/2003/11/17/urbananimal.DTL
In that section you will find two documents that should make a prudent person very
wary of trusting that their medical records are correct and that their Permanente
Physician would only have the best interest of the patient at heart.
http://selfincrimination.kaiserpapers.org
Mandatory arbitration is a private proceeding in which there is no public record or
judicial appeal, and arbitrators are often biased in favor of the HMO. Kaiser failed to
follow state law requiring the HMO to disclose to enrollees that they were giving up their
right to go to court in case of a dispute. Because of this failure, a court found that the
HMO's arbitration provision was not enforceable. Yedalian's suit forced Kaiser to disclose
to patients considering a medical malpractice claim that they may not be bound to
arbitration. After the document filed today is signed by the court, the action will be
dismissed and the court will retain jurisdiction over the case to ensure that the settlement
is enforced and Kaiser informs patients of their rights.
http://legalstuff.kaiserpapers.org/arbitrationnot.html
It is important that you get a copy of your medical records immediately if you are
considering arbitration with Kaiser. Get them before Medical Legal re-writes
them!.
http://www.harp.org/recordmethod.htm
"They don't want to diagnose or treat Lyme disease, because it is very costly to diagnose
and treat. Kaiser has a system where you can't sue them if you are misdiagnosed,
so it just doesn't care."
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/archive/2003/11/17/urbananimal.DTL
In that section you will find two documents that should make a prudent person very
wary of trusting that their medical records are correct and that their Permanente
Physician would only have the best interest of the patient at heart.
http://selfincrimination.kaiserpapers.org
Kaiser arbitration
How to Survive A
Kaiser Mandatory
Binding Arbitration
In a brief study of cost
differences between states with
binding mandatory arbitration in
Kaiser contracts and those that
do not have a mandatory
arbitration clause in their Kaiser
contracts, we have found that
there is no substantial difference
in cost of premiums. Binding
mandatory arbitration does not
appear to have any bearing at
all on the patients premium cost.
I had originally had this very
positive idea that this page
would just be quick pointers and
facts about the Kaiser arbitration
system that would be of
assistance for individuals going
through this type of a legal
situation. Unfortunately, there is
very little to say about Kaiser
arbitration that is positive. Like
everything else Kaiser related, it
is set up only to help Kaiser and
not the patient. Oh, I know what
the rules say and I know what
the government says but again
you have to consider that theory
doesn't always work when it
comes to the health care
industry.
The following is the truth as has
been repeatedly reported to me
for many years.
1. If you can mediate with
Kaiser then do so. You will
probably be strongly
encouraged to sign a gag order
and it will not be documented as
having occurred in any legal
realm available to the public but
you stand a better chance
overall. You will survive with at
least most of your self respect
intact. There will be no record
that your mediation ever took
place.
2. If you are forced to arbitrate
keep in mind that since these
arbitration records are in
government databases for
tracking purposes, Kaiser wants
to make sure the material looks
good only for them so your odds
of coming out ahead are slim to
none. Good data in government
databases gets Kaiser
government grants and
donations and CONTRACTS.
These are Kaiser's meal tickets
and they don't want them taken
away.
3. Arbitration is going to cost
you a lot of money no matter if
the attorney is covering initial
expenses or not. In the end the
attorney has to be reimbursed
so costs for medical experts, etc.
will come out of any settlement
and will probably be the greater
percentage of the settlement.
Kaiser has set aside more
money than you or your
attorney just for the purpose of
making this as difficult as
possible. Kaiser reported in
2005 that they set aside
$40,000,000.00 just for these
little (to them) pesky legal
matters.
4. Expect to have a Kaiser
Private Investigator tailing you
and talking to your friends,
neighbors, ministers,
co-workers, people at the
market, at your children's
schools, at your place of
employment at the movies, etc.
They might claim that they are
gathering data but they are
really just trying to intimidate you.
5. Expect to find out through
your neighbors, children's
schools, your church,
co-workers, etc., that everyone
now knows about your personal
medical history because
someone has gone around and
told these people about you.
Again, this is just a classic form
of Kaiser legal intimidation.
6. Every single traffic ticket you
have ever had, every single
indiscretion that you have ever
made from the age of 5 on up
will now be publicly used against
you, if your attorney allows it.
Only true friends will help you
track this release of information
back to the source. Most people
will not want to become involved
in helping you because they will
not want it done to them as well.
Expect lots of crank calls. Don't
be shocked if you even receive
threats. Again, they are just
trying to intimidate you and get
to you drop your legal action.
7. Expect to be ordered to
present at the very last minute
the previous ten years of all IRS
filings. Kaiser will attempt to
discredit you by implying that
you have lied on your taxes.
Because it appears that they do
this with their records they
automatically assume that
everyone else does. It isn't true
that most people lie and most
people can clearly show that but
again Kaiser may do this to you.
It is just another form of
intimidation. It also takes time
for Kaiser to do this during the
arbitration and when you are
paying for it, time is money.
These actions or accusations
are often followed by a
preplanned dropping of a large
book to make a loud sound or
some other stunt to distract
everyone. In doing so the last
thing in everyone's memory is
the accusation or implication
made by Kaiser staff. It is a little
mind game that the attorneys
sometimes play.
8. Expect Kaiser to create
negative information about you.
Expect Kaiser to conduct an
arbitration as if it were a nasty
divorce preceding.
9. Expect during the arbitration
to have what is left of your belief
system that you have developed
over the years about right and
wrong to be further destroyed.
You probably will see and hear
things that will make you wonder
why the government is allowing
this type of a system. You
probably will see and hear
things that will momentarily make
you think that you are really
living in a corrupt third world
country.
10. After the arbitration, if you
are unable to now obtain
medical insurance elsewhere,
expect to have Kaiser staff
forget to give your family their
immunization shots, to follow up
on medical treatments, to even
be able to readily find medical
appointments for you. They will
make it appear that they are
suddenly very busy and that
they are also just having a lot of
clerical errors. Their actions
would be called retaliation by the
majority of the world.
11. If you have won an
arbitration and have been
granted a financial settlement
expect to wait a long time to
receive the check. In fact expect
and be prepared to have to hire
an attorney to collect the check
for you. Just because Kaiser
was told to do something doesn't
mean that they will be in any
hurry to do so on their own.
12. Be prepared to find that
your "trusted" family doctor turns
on you during an arbitration and
has suddenly documented all
sorts of things about you and
your family that you never knew
happened. This is a great form
of creative writing on Kaiser's
part and they really should start
winning some fiction awards for
it but this is harmful to your case.
13. Kaiser attorneys are also
great actors and probably
should be nominated for some
awards. Most people would
realize that these are scripted
parts that have been well
rehearsed but that the script
also has unbelievable flaws.
Depending on who the arbitrator
is and where their next meal
ticket is coming from it is often
likely that the arbitrator will
applaud these performances.
14. Don't be shocked if during
the arbitration that the Kaiser
attorney and the arbitrator
during proceedings make lunch
arrangements together or talk
about their children's play
dates.
15. If at all possible have a
court reporter document
everything during the
arbitration. Then you will be at
least able to prove what you
experienced at a later time. It
may not change the result of the
arbitration but at least you will
be able to prove what you
witnessed.
16. Do not expect to receive
anything from Kaiser as a result
of these proceedings. You have
waived many of your
Constitutional rights by going to
arbitration and there is no
record in most cases of what
has taken place. You are going
to spend a great deal of money
to arbitrate and it is very likely
that you will never get it all
back. See it for what it is.
Kaiser Mandatory
Binding Arbitration
In a brief study of cost
differences between states with
binding mandatory arbitration in
Kaiser contracts and those that
do not have a mandatory
arbitration clause in their Kaiser
contracts, we have found that
there is no substantial difference
in cost of premiums. Binding
mandatory arbitration does not
appear to have any bearing at
all on the patients premium cost.
I had originally had this very
positive idea that this page
would just be quick pointers and
facts about the Kaiser arbitration
system that would be of
assistance for individuals going
through this type of a legal
situation. Unfortunately, there is
very little to say about Kaiser
arbitration that is positive. Like
everything else Kaiser related, it
is set up only to help Kaiser and
not the patient. Oh, I know what
the rules say and I know what
the government says but again
you have to consider that theory
doesn't always work when it
comes to the health care
industry.
The following is the truth as has
been repeatedly reported to me
for many years.
1. If you can mediate with
Kaiser then do so. You will
probably be strongly
encouraged to sign a gag order
and it will not be documented as
having occurred in any legal
realm available to the public but
you stand a better chance
overall. You will survive with at
least most of your self respect
intact. There will be no record
that your mediation ever took
place.
2. If you are forced to arbitrate
keep in mind that since these
arbitration records are in
government databases for
tracking purposes, Kaiser wants
to make sure the material looks
good only for them so your odds
of coming out ahead are slim to
none. Good data in government
databases gets Kaiser
government grants and
donations and CONTRACTS.
These are Kaiser's meal tickets
and they don't want them taken
away.
3. Arbitration is going to cost
you a lot of money no matter if
the attorney is covering initial
expenses or not. In the end the
attorney has to be reimbursed
so costs for medical experts, etc.
will come out of any settlement
and will probably be the greater
percentage of the settlement.
Kaiser has set aside more
money than you or your
attorney just for the purpose of
making this as difficult as
possible. Kaiser reported in
2005 that they set aside
$40,000,000.00 just for these
little (to them) pesky legal
matters.
4. Expect to have a Kaiser
Private Investigator tailing you
and talking to your friends,
neighbors, ministers,
co-workers, people at the
market, at your children's
schools, at your place of
employment at the movies, etc.
They might claim that they are
gathering data but they are
really just trying to intimidate you.
5. Expect to find out through
your neighbors, children's
schools, your church,
co-workers, etc., that everyone
now knows about your personal
medical history because
someone has gone around and
told these people about you.
Again, this is just a classic form
of Kaiser legal intimidation.
6. Every single traffic ticket you
have ever had, every single
indiscretion that you have ever
made from the age of 5 on up
will now be publicly used against
you, if your attorney allows it.
Only true friends will help you
track this release of information
back to the source. Most people
will not want to become involved
in helping you because they will
not want it done to them as well.
Expect lots of crank calls. Don't
be shocked if you even receive
threats. Again, they are just
trying to intimidate you and get
to you drop your legal action.
7. Expect to be ordered to
present at the very last minute
the previous ten years of all IRS
filings. Kaiser will attempt to
discredit you by implying that
you have lied on your taxes.
Because it appears that they do
this with their records they
automatically assume that
everyone else does. It isn't true
that most people lie and most
people can clearly show that but
again Kaiser may do this to you.
It is just another form of
intimidation. It also takes time
for Kaiser to do this during the
arbitration and when you are
paying for it, time is money.
These actions or accusations
are often followed by a
preplanned dropping of a large
book to make a loud sound or
some other stunt to distract
everyone. In doing so the last
thing in everyone's memory is
the accusation or implication
made by Kaiser staff. It is a little
mind game that the attorneys
sometimes play.
8. Expect Kaiser to create
negative information about you.
Expect Kaiser to conduct an
arbitration as if it were a nasty
divorce preceding.
9. Expect during the arbitration
to have what is left of your belief
system that you have developed
over the years about right and
wrong to be further destroyed.
You probably will see and hear
things that will make you wonder
why the government is allowing
this type of a system. You
probably will see and hear
things that will momentarily make
you think that you are really
living in a corrupt third world
country.
10. After the arbitration, if you
are unable to now obtain
medical insurance elsewhere,
expect to have Kaiser staff
forget to give your family their
immunization shots, to follow up
on medical treatments, to even
be able to readily find medical
appointments for you. They will
make it appear that they are
suddenly very busy and that
they are also just having a lot of
clerical errors. Their actions
would be called retaliation by the
majority of the world.
11. If you have won an
arbitration and have been
granted a financial settlement
expect to wait a long time to
receive the check. In fact expect
and be prepared to have to hire
an attorney to collect the check
for you. Just because Kaiser
was told to do something doesn't
mean that they will be in any
hurry to do so on their own.
12. Be prepared to find that
your "trusted" family doctor turns
on you during an arbitration and
has suddenly documented all
sorts of things about you and
your family that you never knew
happened. This is a great form
of creative writing on Kaiser's
part and they really should start
winning some fiction awards for
it but this is harmful to your case.
13. Kaiser attorneys are also
great actors and probably
should be nominated for some
awards. Most people would
realize that these are scripted
parts that have been well
rehearsed but that the script
also has unbelievable flaws.
Depending on who the arbitrator
is and where their next meal
ticket is coming from it is often
likely that the arbitrator will
applaud these performances.
14. Don't be shocked if during
the arbitration that the Kaiser
attorney and the arbitrator
during proceedings make lunch
arrangements together or talk
about their children's play
dates.
15. If at all possible have a
court reporter document
everything during the
arbitration. Then you will be at
least able to prove what you
experienced at a later time. It
may not change the result of the
arbitration but at least you will
be able to prove what you
witnessed.
16. Do not expect to receive
anything from Kaiser as a result
of these proceedings. You have
waived many of your
Constitutional rights by going to
arbitration and there is no
record in most cases of what
has taken place. You are going
to spend a great deal of money
to arbitrate and it is very likely
that you will never get it all
back. See it for what it is.
$45,075,425.00
of Kaiser Foundation
Health Plan's income
in 2007 went to legal
fees:
Link: Kaiser 2007 tax returns
of Kaiser Foundation
Health Plan's income
in 2007 went to legal
fees:
Link: Kaiser 2007 tax returns
Kaiser Permanente
Mandatory Arbitration
Wikipedia
The Foundation for Taxpayer
and Consumer Rights contends
that Kaiser continues to oppose
HMO arbitration reform
The current Kaiser arbitration
system has been criticized
because of the 'frequent user'
problem. Since Kaiser may
accept or reject any neutral
arbitrator, decisions made
against Kaiser may
effectively put a judge or
lawyer wanting to earn a
living as an arbitrator out of
business. The personal
economic advantage that
accrues to an arbitrator
finding in favor of Kaiser,
and the potential inability of
an arbitrator to work if he or
she finds against Kaiser has
resulted in the accusation
that this system is inherently
biased in favor of Kaiser and
against patients who make
claims of malpractice.
Kaiser established an Office of
Independent Administrators
(OIA) in 1999 to oversee the
arbitration process. The
degree to which this is
independent has been
questioned.
Patients and consumer interest
groups sporadically attempt to
bring lawsuits against Kaiser
Permanente. Recent lawsuits
include Gary Rushford's 1999
attempt to use proof of a
physician lie to overturn an
arbitration decision.
Mandatory Arbitration
Wikipedia
The Foundation for Taxpayer
and Consumer Rights contends
that Kaiser continues to oppose
HMO arbitration reform
The current Kaiser arbitration
system has been criticized
because of the 'frequent user'
problem. Since Kaiser may
accept or reject any neutral
arbitrator, decisions made
against Kaiser may
effectively put a judge or
lawyer wanting to earn a
living as an arbitrator out of
business. The personal
economic advantage that
accrues to an arbitrator
finding in favor of Kaiser,
and the potential inability of
an arbitrator to work if he or
she finds against Kaiser has
resulted in the accusation
that this system is inherently
biased in favor of Kaiser and
against patients who make
claims of malpractice.
Kaiser established an Office of
Independent Administrators
(OIA) in 1999 to oversee the
arbitration process. The
degree to which this is
independent has been
questioned.
Patients and consumer interest
groups sporadically attempt to
bring lawsuits against Kaiser
Permanente. Recent lawsuits
include Gary Rushford's 1999
attempt to use proof of a
physician lie to overturn an
arbitration decision.
Engalla v. Permanente Medical Group, Inc.
University of California, Hastings College of Law
Hastings Law Journal
March, 1999
By Russell Evans
On June 30, 1997, the California Supreme Court handed down its decision in Engalla v.
Permanente Medical Group, Inc. The Engalla Court refused to compel arbitration of
a medical malpractice claim despite the presence of a binding arbitration clause
in the terms of a medical insurance agreement.
The California Court indicated that defendant malfeasance appeared likely, and it
remanded the case to the trial court for factual determinations on whether the
defendant HMO, Kaiser Permanente Medical Group, induced the
arbitration clause through fraud or waived its right to arbitration
due to its dilatory conduct.
...Rather, it is the Court's intriguing examination and careful scrutiny of Kaiser's arbitration
process that raises key legal questions. Under the conventional review of arbitration
clauses, courts limit their analysis to issues of creation and initial consent to such clauses.
The Engalla Court, however, did not limit itself to the formation of the arbitration
agreement. Instead, the Court conducted a sweeping examination into how the
Kaiser arbitration process functioned and considered whether the process was
an adequate system for resolving malpractice claims. Using this mode of
analysis, the majority found numerous flaws in Kaiser's arbitration process. The
opinion is especially critical of the ways in which the arbitration process infringed upon the
procedural rights of claimants. The Court's examination of the arbitral process, rather
than agreement formation, and its focus ...
University of California, Hastings College of Law
Hastings Law Journal
March, 1999
By Russell Evans
On June 30, 1997, the California Supreme Court handed down its decision in Engalla v.
Permanente Medical Group, Inc. The Engalla Court refused to compel arbitration of
a medical malpractice claim despite the presence of a binding arbitration clause
in the terms of a medical insurance agreement.
The California Court indicated that defendant malfeasance appeared likely, and it
remanded the case to the trial court for factual determinations on whether the
defendant HMO, Kaiser Permanente Medical Group, induced the
arbitration clause through fraud or waived its right to arbitration
due to its dilatory conduct.
...Rather, it is the Court's intriguing examination and careful scrutiny of Kaiser's arbitration
process that raises key legal questions. Under the conventional review of arbitration
clauses, courts limit their analysis to issues of creation and initial consent to such clauses.
The Engalla Court, however, did not limit itself to the formation of the arbitration
agreement. Instead, the Court conducted a sweeping examination into how the
Kaiser arbitration process functioned and considered whether the process was
an adequate system for resolving malpractice claims. Using this mode of
analysis, the majority found numerous flaws in Kaiser's arbitration process. The
opinion is especially critical of the ways in which the arbitration process infringed upon the
procedural rights of claimants. The Court's examination of the arbitral process, rather
than agreement formation, and its focus ...
ANNUAL REPORT of the OFFICE OF THE INDEPENDENT ADMINISTRATOR
of the KAISER FOUNDATION HEALTH PLAN, INC.
MANDATORY ARBITRATION SYSTEM for
DISPUTES WITH HEALTH PLAN MEMBERS
January 1, 2010 - December 31, 2010
...A. How Cases Closed
1. Settlements – 44% of Closures
During 2010, 277 of the 624 cases settled... In 18 settled cases (6.5%), the
claimant was in pro per...
2. Withdrawn Cases – 25% of Closures
In 2010, the OIA received notice that 155 claimants had withdrawn their claims. In
48 (31%) of these cases, the claimant was in pro per...
3. Abandoned Cases – 4% of Closures...
4. Dismissed Cases – 3% of Closures...
5. Summary Judgment – 11% of Closures
In 2010, 67 cases were decided by summary judgments granted to the respondent. In 46
of these cases (69%), the claimant was in pro per. Failing to have an expert witness (29
cases), failing to file an opposition (12 cases), exceeding the statute of limitations (14
cases), and no triable issue
of fact (11 cases) were the most common reasons given by the neutrals in their written
decisions for the grant of summary judgment...
6. Cases Decided After Hearing – 12% of Closures
a. Who Won
Twelve percent of all cases closed in 2010 (76 of 624) proceeded through a full
arbitration hearing to an award. Judgment was for Kaiser in 51 of these cases, or 67%. In
six of these cases, the claimant was in pro per. The claimant prevailed in 25 of them, or
33%. None was a pro per claimant.
b. How Much Claimants Won
Twenty-five cases resulted in awards to claimants. One claimant was awarded
$2,110,000. The range of relief is $20,000 – $2,110,000. The average amount of an
award is $392,461...
of the KAISER FOUNDATION HEALTH PLAN, INC.
MANDATORY ARBITRATION SYSTEM for
DISPUTES WITH HEALTH PLAN MEMBERS
January 1, 2010 - December 31, 2010
...A. How Cases Closed
1. Settlements – 44% of Closures
During 2010, 277 of the 624 cases settled... In 18 settled cases (6.5%), the
claimant was in pro per...
2. Withdrawn Cases – 25% of Closures
In 2010, the OIA received notice that 155 claimants had withdrawn their claims. In
48 (31%) of these cases, the claimant was in pro per...
3. Abandoned Cases – 4% of Closures...
4. Dismissed Cases – 3% of Closures...
5. Summary Judgment – 11% of Closures
In 2010, 67 cases were decided by summary judgments granted to the respondent. In 46
of these cases (69%), the claimant was in pro per. Failing to have an expert witness (29
cases), failing to file an opposition (12 cases), exceeding the statute of limitations (14
cases), and no triable issue
of fact (11 cases) were the most common reasons given by the neutrals in their written
decisions for the grant of summary judgment...
6. Cases Decided After Hearing – 12% of Closures
a. Who Won
Twelve percent of all cases closed in 2010 (76 of 624) proceeded through a full
arbitration hearing to an award. Judgment was for Kaiser in 51 of these cases, or 67%. In
six of these cases, the claimant was in pro per. The claimant prevailed in 25 of them, or
33%. None was a pro per claimant.
b. How Much Claimants Won
Twenty-five cases resulted in awards to claimants. One claimant was awarded
$2,110,000. The range of relief is $20,000 – $2,110,000. The average amount of an
award is $392,461...
California
Research Bureau
Finds HMO
Arbitration Is
Unfair
1/11/2001
Jamie Court
The California Research Bureau, the state
equivalent of the US General Accounting
Office, has issued a report today that
shows more than three-fourths of
Californians who are enrolled in managed
care companies are forced into binding
arbitration as a condition of enrollment and
that the arbitration process itself is unfair.
The report is on the Internet at
http://www.library.ca.gov/html/statseg2a.cfm.
"This report should
convince the
legislature that
patients should not
have to waive their
right to trial simply to
join an HMO," said
Jamie Court, executive
director of the
Foundation for
Taxpayer and
Consumer Rights,
which intends to
reintroduce state
legislation stopping
forced arbitration at
HMOs. "This report
shows the HMO's
private justice system
is tilted against the
patient. With a new
HMO liability law in
effect as of January
1st, it's more critical
than ever that patients
with HMO problems
not be kept out of
court by forced
arbitration
agreements. Other
states with HMO
liability laws, such as
Texas, Washington,
and Georgia, do not
permit HMOs to force
patients into secret
arbitration
proceedings where
private lawyers, rather
than judges, preside."
The report, minor
modifications to which
are detailed in cover
letter from State
Senator Sheila Kuehl,
finds:
* Many health plans
are apparently not
complying with state
reporting
requirements
regarding even minor
details surrounding
the outcomes of their
private arbitrations.
* Contrary to claims by
proponents of
mandatory arbitration,
"Arbitration is
expensive, at least for
patients on normal
budgets. California
arbitrators typically
charge $250 to $400
per hour [and a]
typical California
health care arbitration
costs around $4,500."
* While health plans
are likely to have
repeated experiences
with individual
arbitrators and are in
a good position to
make informed
decisions when
choosing an arbitrator
for a case, "Patients
may not be as well
informed about
arbitrator behavior,
especially if they are
proceeding without
the aid of a lawyer" --
which the report notes
is the case with very
high frequency.
* California, like most
states, does not have
established professional
standards or licensing
requirements for
arbitrators. Thus private
arbitrators generally do
not have to meet even
minimal standards of
conduct, nor is there any
real mechanism for a
patient to challenge an
arbitrator's professional
qualifications.
* Contrary to earlier
claims by some
proponents of
mandatory arbitration in
health care, there
appears to be a very
high rate of repeat use
of preferred arbitrators
by HMOs, including in
the Kaiser system,
which was supposed to
be reformed following
condemnation of its
practices by the
California Supreme
Court. In a review of
1999 arbitration claims
on file with the
Department of
Managed Health Care,
the report found that 30
percent of Kaiser
Permamente's
arbitration claims (the
largest of the health
plans mandating the
use of binding
arbitration) were
decided by just eight
repeat arbitrators (five
or more arbitrations
each). Strikingly, six of
these eight repeat
arbitrators ruled in
favor of the defense
(Kaiser) in 80% of the
cases. The report
further states that if
one defines a "repeat
arbitrator" more broadly
as someone who
arbitrates more than
three claims in a given
year, almost half (46
percent) of the Kaiser
cases were decided by
repeat arbitrators. In
those cases, plaintiffs
won less than a quarter
(24 percent) of the time.
Research Bureau
Finds HMO
Arbitration Is
Unfair
1/11/2001
Jamie Court
The California Research Bureau, the state
equivalent of the US General Accounting
Office, has issued a report today that
shows more than three-fourths of
Californians who are enrolled in managed
care companies are forced into binding
arbitration as a condition of enrollment and
that the arbitration process itself is unfair.
The report is on the Internet at
http://www.library.ca.gov/html/statseg2a.cfm.
"This report should
convince the
legislature that
patients should not
have to waive their
right to trial simply to
join an HMO," said
Jamie Court, executive
director of the
Foundation for
Taxpayer and
Consumer Rights,
which intends to
reintroduce state
legislation stopping
forced arbitration at
HMOs. "This report
shows the HMO's
private justice system
is tilted against the
patient. With a new
HMO liability law in
effect as of January
1st, it's more critical
than ever that patients
with HMO problems
not be kept out of
court by forced
arbitration
agreements. Other
states with HMO
liability laws, such as
Texas, Washington,
and Georgia, do not
permit HMOs to force
patients into secret
arbitration
proceedings where
private lawyers, rather
than judges, preside."
The report, minor
modifications to which
are detailed in cover
letter from State
Senator Sheila Kuehl,
finds:
* Many health plans
are apparently not
complying with state
reporting
requirements
regarding even minor
details surrounding
the outcomes of their
private arbitrations.
* Contrary to claims by
proponents of
mandatory arbitration,
"Arbitration is
expensive, at least for
patients on normal
budgets. California
arbitrators typically
charge $250 to $400
per hour [and a]
typical California
health care arbitration
costs around $4,500."
* While health plans
are likely to have
repeated experiences
with individual
arbitrators and are in
a good position to
make informed
decisions when
choosing an arbitrator
for a case, "Patients
may not be as well
informed about
arbitrator behavior,
especially if they are
proceeding without
the aid of a lawyer" --
which the report notes
is the case with very
high frequency.
* California, like most
states, does not have
established professional
standards or licensing
requirements for
arbitrators. Thus private
arbitrators generally do
not have to meet even
minimal standards of
conduct, nor is there any
real mechanism for a
patient to challenge an
arbitrator's professional
qualifications.
* Contrary to earlier
claims by some
proponents of
mandatory arbitration in
health care, there
appears to be a very
high rate of repeat use
of preferred arbitrators
by HMOs, including in
the Kaiser system,
which was supposed to
be reformed following
condemnation of its
practices by the
California Supreme
Court. In a review of
1999 arbitration claims
on file with the
Department of
Managed Health Care,
the report found that 30
percent of Kaiser
Permamente's
arbitration claims (the
largest of the health
plans mandating the
use of binding
arbitration) were
decided by just eight
repeat arbitrators (five
or more arbitrations
each). Strikingly, six of
these eight repeat
arbitrators ruled in
favor of the defense
(Kaiser) in 80% of the
cases. The report
further states that if
one defines a "repeat
arbitrator" more broadly
as someone who
arbitrates more than
three claims in a given
year, almost half (46
percent) of the Kaiser
cases were decided by
repeat arbitrators. In
those cases, plaintiffs
won less than a quarter
(24 percent) of the time.
People
Kaiser Permanente links
Diagnostic Imaging
Diagnosis
Medical Records
Other
Doctors
Petition for review by the California Supreme Court.
STATEMENT OF ISSUE PRESENTED FOR REVIEW
Whether the standard for vacatur of a medical malpractice arbitration award procured
by the fraud of a physician-fiduciary requires satisfaction of the extrinsic fraud rule or a
showing that fraud could not have been discovered through diligence, rather than a
simple showing that fraud had been committed, where the treating relationship is
ongoing and the physician has a contractual obligation to provide a fair arbitration.
Court of Appeal No. A104598
San Mateo County Super. Ct. No. CIV413484
No. ___________ IN THE SUPREME COURT OF CALIFORNIA
GARY RUSHFORD et al, Petitioners,
v.
KAISER FOUNDATION HOSPITALS, et al., Respondents.
PETITION FOR REVIEW OF DECISION OF THE COURT OF APPEAL FIRST
APPELLATE DISTRICT
SHARONROSE CANNISTRACI (CSBN 121827)
99 Almaden Boulevard, Suite 925
San Jose, CA 95113
Tel: 408/ 297 5400 (sharonrose@cannistracilaw.com)
MARY McNAMARA (CSBN 147131)
SWANSON & McNAMARA LLP
300 Montgomery Street, Suite 1100
San Francisco, CA. 94108
Tel: 415/ 477 3800 (mmcnamara@swansonmcnamara.com)
Attorneys for Petitioners
TABLE OF CONTENTS
STATEMENT OF ISSUE PRESENTED FOR REVIEW
I. INTRODUCTION
II. BACKGROUND
III. ARGUMENT
A. The Court of Appeal's Order Affirming the Judgment in this Case Raises An
Important Question of Law That Was Wrongly Decided
1. The Court of Appeal Incorrectly Assumed That the Extrinsic Fraud Rule Applies in
the Context of Vacatur of Arbitration Awards
(a) The Extrinsic Fraud Rule Should Not Apply in the Context of Unconfirmed
Arbitration Awards
(b) The Extrinsic Fraud Rule in Any Event Should Not Be Applied in Fiduciary Cases
2. The Court of Appeal Incorrectly Held That Vacatur Requires Diligence in Ferreting
out Fraud Even in Fiduciary Cases Where the Fiduciary Relationship Is Ongoing
During Arbitration and Where the Fiduciary Is Contractually Bound to Provide a Fair
Arbitration
(a) A Physician Fiduciary Owes Particularly High Standards of Disclosure to His
Patients and the Patient Has No Duty to Investigate the Physician's Representations
(b) The Institution of Litigation Does Not Convert an On-Going Fiduciary Relationship
into One at Arm's Length
IV. CONCLUSION
TABLE OF AUTHORITIES
Footnootes
STATEMENT OF ISSUE PRESENTED FOR REVIEW
Whether the standard for vacatur of a medical malpractice arbitration award procured
by the fraud of a physician-fiduciary requires satisfaction of the extrinsic fraud rule or a
showing that fraud could not have been discovered through diligence, rather than a
simple showing that fraud had been committed, where the treating relationship is
ongoing and the physician has a contractual obligation to provide a fair arbitration.
Petitioners respectfully ask this Court to review the unpublished decision of a panel of
the Court of Appeal, First Appellate District, affirming the judgment of the San Mateo
County Superior Court which confirmed an adverse medical malpractice award against
them after denying their petition to vacate it on grounds of "corruption, fraud or other
undue means" within the meaning of California Code of Civil Procedure Section
1286.2, subdivision (a)(1). A true and correct copy of the Order of the Court of Appeal,
filed April 18, 2005, is attached as Exhibit 1 to this Petition.
I. INTRODUCTION
This is a medical malpractice case involving limb amputation in which the physician
parties procured an arbitration award during the course of treatment by
misrepresenting the nature of blood work ups that they conducted and by concealing
records that contradicted their litigation position at arbitration. Within the time period
allowed for vacatur, the patient petitioned to vacate the unconfirmed award on the
grounds that it was procured by his treating physicians via "corruption, fraud or other
undue means" within the meaning of California Code of Civil Procedure Section
1286.2, subdivision (a)(1). The trial court denied the petition, resting its ruling on the
extrinsic fraud rule. The Court of Appeal affirmed, holding that institution of a
malpractice claim converts an on-going doctor/patient relationship into an arm's length
adversarial relationship for purposes of arbitration, relieving physicians of the fiduciary
duty of disclosure owed in treatment, and imposing on patients heightened vacatur
rules which require proof that the fraud could not have been unearthed during the
arbitration through exercise of diligence.
In divesting physicians of their duty of disclosure upon institution of a malpractice
claim, the Court of Appeal's decision inappropriately extends legal principles designed
for the marketplace to the realm of on-going fiduciary relationships. As such, the
Court's decision contradicts the line of authority which imposes higher duties on
fiduciaries in their dealings with beneficiaries and it runs counter to sound public policy
requiring fiduciaries to continue to honor their core fiduciary duty of disclosure even
where the beneficiary institutes legal proceedings against them.
Kaiser is the largest HMO and medical provider in California and in the United States. It
has operations throughout northern and southern California and over eight million
members nationwide. The issue in this appeal raises an important public policy
question regarding the fairness and integrity of Kaiser's mandatory, medical
malpractice arbitration system, which features a contractual promise to provide
patients a fair arbitration. The question is especially important given that patients are
captive in the Kaiser system, even after institution of malpractice claims, and are rarely
in a position to search elsewhere for medical care. As such, they are abjectly
dependent on their physicians to continue to comply with their duty of full disclosure.
The physician fraud perpetrated by Kaiser in this case deprived the patient of his day
in court on the malpractice that was committed. The Court of Appeal held that the
patient has no remedy in this case because his act of instituting a malpractice case
released the physicians from their fiduciary duty of full disclosure. Such a result has no
basis in the law and flouts the strong public policy protecting patients in the context of
mandatory arbitration schemes.
II. BACKGROUND
This is a medical malpractice case against Kaiser Foundation Hospitals, Kaiser
Foundation Health Plan, Inc. and Permanente Medical Group, Inc. ("Kaiser") by Gary
Rushford and his wife Sharon Rushford arising out of Kaiser's amputation of Gary
Rushford's right leg some seven years ago. The pertinent facts for purposes of this
petition are as follows:
In 1998, Gary Rushford experienced a series of clotting episodes in the arteries of his
right leg. Kaiser hospitalized him for thrombolysis treatment, but after each episode
released him without adequate, or any, levels of anti-clotting medication. In July 1998,
still without anti-clotting medication, Gary Rushford's condition had deteriorated to a
point where Kaiser could no longer treat him with thrombolysis. At that time, Kaiser
performed blood tests in an effort to determine if he had a hypercoagulable condition (i.
e., abnormal clotting of the blood) that could be treated by anti-clotting medication.
Kaiser's July 1998 blood tests were negative for such condition. In late July 1998, after
a series of increasingly invasive surgeries, Kaiser amputated his right leg above the
knee. (Order at pp. 2-3). Gary Rushford was placed on anti-clotting medication
thereafter and remained on it for the next three years with no recurrence of clotting in
his legs. (Id., at p. 3) 1
At the medical malpractice arbitration that followed, the Rushfords contended that the
loss of Gary Rushford's leg was caused by a hypercoagulable condition which was
controllable by anti-clotting medication and that Kaiser's failure to administer such
medication constituted malpractice. Kaiser contended that it acted within the standard
of care and that other conditions (i.e., conditions other than a hypercoagulable
condition which was unresponsive to anti-clotting medication) caused the loss of Gary
Rushford's leg. (Order at p. 5)
In discovery, Kaiser produced its blood test results for Gary Rushford. (Order at p. 5)
After the close of evidence, but before issuance of the award, the arbitrator received
from the Rushfords' attorney a letter from Gary Rushford's treating physician
addressed to a Stanford consultant. The letter described Mr. Rushford's history of
clotting problems and treatment and requested an evaluation for a hypercoagulable
condition. (Id.) The request in this letter contradicted Kaiser's litigation position that a
hypercoagulable state was not the cause of Mr. Rushford's condition. The arbitrator
found that Kaiser had breached the standard of care in failing to treat with anti-clotting
medication before amputating the leg (Order at p. 1) but the arbitrator also found that
the evidence was evenly balanced on the issue of causation (i.e., that the failure to
treat with anticlotting medication caused the condition resulting in amputation).
Accordingly, the arbitrator ruled against the Rushfords for failing to carry their burden
of proof on causation.
After the arbitrator rendered his decision, Gary Rushford tested positive at Stanford for
a hypercoagulable condition that is controllable by anti-clotting medication. (Order at
pp. 1, 6). It was in this manner that the Rushfords discovered that Kaiser had failed to
perform a crucial test for hypercoagulable state, despite representations to the
contrary.
Pursuant to California Code of Civil Procedure §1286.2, subd. (a)(1) (Section 1286.2
(a)(1)),2 the Rushfords filed a petition to vacate the award on the grounds that it was
procured by "corruption, fraud or other undue means." (Order at p. 6.) The Rushfords
contended that Kaiser repeatedly misrepresented that they had performed all available
blood tests to rule out the possibility that Gary Rushford had a hypercoagulable
condition and misrepresented that all tests for a hypercoagulable condition were
negative.
The trial court denied the Rushfords' petition to vacate the award, holding that the
extrinsic fraud rule applied to this arbitration and finding that the Rushfords had an
opportunity to conduct discovery as to the extent of Kaiser's testing thereby barring
vacatur. (Order at pp. 12, 22)
The Court of Appeal affirmed the judgment of the trial court.
While the Court acknowledged that a fiduciary relationship exists between Petitioner
Rushford and his treating physicians in the context of medical treatment, it held that,
upon institution of the malpractice claim, the parties dealt at arm's length with each
other in the arbitration proceedings. (Order at p. 20). In the context of this arm's length
relationship, the Court held, vacatur was barred because Kaiser's fraud was intrinsic to
the arbitration proceedings, or, alternatively, because Petitioners had failed to exercise
diligence in unearthing the fraud.
III. ARGUMENT
A. The Court of Appeal's Order Affirming the Judgment in this Case Raises An
Important Question of Law That Was Wrongly Decided
The question of law as to what standard should control vacatur of unconfirmed
arbitration awards in cases such as this is one of first impression. Neither this Court
nor any Court of Appeal in a published opinion has considered it. Because of the
enormous number of cases subject to Kaiser's mandatory arbitration system, the issue
in this case raises an important question of law.
In arriving at its decision, the Court of Appeal applied both the traditional extrinsic fraud
rule of vacatur and the three-pronged federal rule of vacatur as adopted by the Court
of Appeal for the Second Appellate District in the non-fiduciary case of Pour Le Bebe,
Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810.
Neither rule should control in the circumstances of this case, where a patient is in an
on-going treating relationship with his physician during a proceeding which is an
arbitration.
With respect to the extrinsic fraud rule, review is required not only because application
of the rule in a doctor/patient setting is a novel one which raises an important question
of law, but a conflict exists between the Courts of Appeal for the First and Second
Appellate Districts as to the continued viability of the rule, especially in the context of
arbitration cases in general. Many Court of Appeal cases recognize a "fiduciary
exception" to the rule and procedural reform has led the federal courts to abandon it
entirely for all cases. This Court should secure uniformity of decisionmaking in
California and settle the important question of law in favor of holding that the extrinsic
fraud rule does not apply in the context of arbitration cases involving claims of fiduciary
breach.
With respect to Court of Appeal's application of the federal vacatur rule, which requires
the movant to show 1) that fraud exists by clear and convincing evidence; 2) that the
fraud was not discoverable upon exercise of reasonable diligence before or during the
arbitration, and 3) that the fraud materially related to an issue in the arbitration, no
California case applies these standards to actions involving fiduciaries, still less to
fiduciaries who are in on-going fiduciary relationships at the time of the arbitration, and
who are contractually bound by a covenant of fairness as Kaiser was here. Petitioners
submit that the correct standard in such a case is one of a showing of fraud by a
preponderance of the evidence, that the fraud was material to an issue at the
arbitration and that there be no requirement to show diligence in investigation. Unless
this Court settles the standard that applies in such cases, patients throughout
California who, like Petitioners, are forced into arbitration and are captive in on-going
treating relationships with the same doctors against whom they are arbitrating, will be
denied the ability to make fundamental treatment decisions
1. The Court of Appeal Incorrectly Assumed That the Extrinsic Fraud Rule Applies in
the Context of Vacatur of Arbitration Awards
(a) The Extrinsic Fraud Rule Should Not Apply in the Context of Unconfirmed
Arbitration Awards
The extrinsic fraud rule provides that once a judgment is final, parties in a civil lawsuit
ordinarily will not be permitted to set a final judgment aside and re-litigate the issues
previously determined in the action, except in those cases where the fraud is extrinsic
to the questions determined in the action. (Pico v. Cohn (1891) 91 Cal. 129, 133-134).
"Extrinsic" fraud in this context means fraud of a kind which keeps the unsuccessful
party from having a trial at all, as opposed to having a trial which is rendered unfair by
perjury or withholding of evidence. (Id.; see also, 8 Witkin, Cal. Procedure (4th ed.
1997) Attack on Judgment in Trial Court, § 223, p. 727 ["The most common ground for
equitable relief [from a final judgment] is extrinsic fraud, a broad concept that covers a
number of situations. Its essential characteristic is that it has the effect of preventing a
fair adversary hearing, the aggrieved party being deliberately kept in ignorance of the
action or proceeding, or in some other way fraudulently prevented from presenting his
claim or defense"].)
The extrinsic fraud rule has long been criticized as difficult to apply and lacking in a
sound basis in policy. (11 C. Wright & A. Miller, Federal Practice and Procedure (1973)
p. 2868, at 240-241- "[It] rests on cloudy and confused authorities, its soundness as a
matter of policy is very doubtful, and it is extremely difficult to apply."). The
Restatement abandoned it (Rest.2d, Judgments §70) and it has been formally
abolished by Congress. It is not applicable to a motion to vacate a federal judgment
based on intrinsic fraud. See Fed.R.Civ.P 60(b)(3) [court may relieve a party from a
final judgment for fraud whether denominated "intrinsic" or "extrinsic"]. Federal
authorities question whether the extrinsic fraud rule remains authoritative even in a
separately filed federal action and not just on motion in the same action. (Id.)
The extrinsic fraud rule grew out of cases where final judgments were entered after full
trials, not cases where awards were entered after summary arbitration proceedings.
The motive force behind the extrinsic fraud rule was the strong judicial policy favoring
finality of judgments.
[T]here must be an end of litigation, and when parties have once submitted a matter,
or have had the opportunity of submitting it, for investigation and determination in the
same proceeding, it must be regarded as final and conclusive, unless it can be shown
that the jurisdiction of the court has been imposed upon, or that the prevailing party,
by some extrinsic or collateral fraud, has prevented a fair submission of the
controversy.
(Pico v. Cohn, supra, 91 Cal. at pp. 133-134.)
Where, as here, the proceeding at issue is an arbitration which produces an award not
yet confirmed, the extrinsic fraud rule should not apply for the separate reason that no
final judgment exists whose finality must be enforced. "An award that has not been
confirmed or vacated [by the superior court] has the same force and effect as a
contract in writing between the parties to the arbitration." (§ 1287.6.)
Although the Court of Appeal rejected this argument (Order at 14), a trio of cases from
1978 contains dicta that a more relaxed vacatur standard does apply when the award
has not been confirmed as a judgment. See, e.g., Lamb v. Holy Cross Hospital (1978)
83 Cal. App. 3d 1007, 1011; [hospital and doctors concealment of medical records
during arbitration constituted intrinsic fraud and patient's remedy was to petition trial
court to "vacate the award" before it was confirmed and became a final judgment]; Rios
v. Allstate Ins. Co. (1977) 68 Cal. App. 3d 811, 818-819 [insured's remedy against
insurer who procured award by false testimony (intrinsic fraud) was to file a petition to
vacate the award] and Mansdorf v. California Physicians' Service, Inc. (1978) 87 Cal.
App. 3d 412 [citing with approval the language in Rios where defendant procured
award by "what amounted to intrinsic fraud, and held that conduct could, and should,
have been raised" by a petition to vacate under section 1286.2].
More recently, the Court of Appeal for the Second Appellate District in Pour Le Bebe,
Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810 held that the extrinsic fraud rule should
be abandoned in arbitration cases.3 (Without holding that the extrinsic fraud rule
should be abandoned, the Court of Appeal in this case cited the Pour Le Bebe opinion
favorably. Order at 16-17.) Recognizing the extrinsic fraud rule's roots as a measure
geared toward finality of outcomes in fully-contested trials, the Pour Le Bebe court held
that the parties to an arbitration are "not afforded the full panoply of procedural rights
available to civil litigants." Accordingly, "courts generally take a more lenient approach
when examining intrinsic fraud in the context of a motion to vacate an arbitration
award" than courts would to a motion to vacate a final judgment. (Id, at 828-829.) The
Pour Le Bebe court cited a number of federal cases 4 which deemed arbitration
awards subject to vacatur for intrinsic fraud, including false testimony (id., at 829-30).
Petitioners note that Pour Le Bebe conflicts with other Court of Appeal cases which
applied the traditional extrinsic fraud rule. For example, in the earlier case of Pacific
Crown Distributors v. Brotherhood of Teamsters and Auto Truck Drivers, Local 70
(1986)183 Cal.App.3d 1138, the Court of Appeal for the First Appellate District applied
the extrinsic fraud rule to vacate an award secured as a result of a new issue
presented for the first time in a post-arbitration brief by a party which had previously
stipulated that the issues were limited in a manner that excluded the newlyraised issue.
The Court held that this conduct subverted the fairness of the hearing and
"intentionally and fraudulently deprived [respondent] of its opportunity to present
evidence in an arbitration . . . ." (Pacific Crown Distributors, supra, 183 Cal.App. at p.
1149.)
In light of the conflict amongst the divisions of the appellate courts as to application of
the extrinsic fraud rule in arbitration cases, and in light of the policy reasons
undermining application of the rule to unconfirmed arbitration awards, review is
necessary in order to secure uniformity of decision. Petitioners submit that this Court
should follow the reasoning in Pour Le Bebe and the federal cases insofar as it
supports the abandonment of the extrinsic fraud rule in arbitration cases.
(b) The Extrinsic Fraud Rule in Any Event Should Not Be Applied in Fiduciary Cases
The Court of Appeal recognized that, in what it termed "very limited circumstances," the
"courts have applied the exception or found extrinsic fraud where there is a fiduciary
relationship between the parties and one party conceals or misrepresents information
that does not preclude the other party from participating in the proceedings, but does
prevent the party from fully presenting his or her case." (Order at 18.) The Court went
on to suggest however, that these cases were limited to instances such as dissolution
proceedings, where one spouse conceals assets from the other in a manner not
discernible through reasonable investigation. (Id. at 18-19, emphasis added, citing In
re Marriage of Stevenot (1984) 154 Cal.App.3d at pp. 1060-1068 and cases cited
therein; Kuehn v. Kuehn (2000) 85 Cal.App.4th 824, 832; In re Marriage of Modnick
(1983) 33 Cal.3d 897, 905-906.) Despite this statement, the Court appeared to
concede that the case of Estate of Anderson (1983) 149 Cal. App. 3d 336, rehearing
denied; petition to Supreme Court denied, was a case where reasonable investigation
would have uncovered the fraud and thus, that the fiduciary exception does not require
diligence on the part of the beneficiary. (Order at 19.)
In Estate of Anderson, an executor bank concealed and misstated facts regarding the
sale of estate property and related tax issues from beneficiaries even though it gave
actual notice of the hearing to the beneficiaries. The Court's characterization of the
cases notwithstanding, it is well-settled that:
The failure to perform the duty to speak or make disclosures which rests upon one
because of a trust or confidential relation is obviously a fraud, for which equity may
relieve from a judgment thereby obtained, even though the breach of duty occurs
during a judicial proceeding and involves false testimony and this is true whether such
fraud be regarded as extrinsic or as an exception to the extrinsic fraud rule.
(Freeman, Judgments (5th ed. 1925), Section 1235, p. 2576, cited in In re Marriage of
Modnick, supra 33 Cal. 3d at pp. 905-906 [husband's false testimony at trial and failure
to disclose assets is grounds for vacating final judgment as a fiduciary has a duty to
make full disclosure of all material facts].
Indeed, it is precisely because fiduciaries are held to far higher standards of conduct
than arm's length actors, that courts have vacated judgments where they have been
obtained on the basis of even intrinsic fraud. (Estate of Sanders (1985) 40 Cal. 3d
607, 615 [some courts deem the fiduciary's fraud to constitute 'extrinsic' fraud, while
other courts hold a fiduciary's fraud constitutes an 'exception' to the extrinsic fraud
rule, but in either case, however denominated, fiduciary fraud constitutes grounds for
vacating a judgment].)
In sum, the very sine qua non of the fiduciary relationship is that it is one of trust and
confidence which entitles the beneficiary to rely on the fiduciary's honesty and honor
without having to verify his representations. In the seminal case of Meinhard v. Salmon
(1928) 249 NY 458, Chief Justice Cardozo set forth the lofty standards to which
fiduciaries are held:
Many forms of conduct permissible in a workaday world for those acting at arm's length
are forbidden to those bound by fiduciary ties. A trustee is held to something stricter
than the morals of the market place. Not honesty alone, but the punctilio of an honor
the most sensitive, is then the standard of behavior. As to this there has developed a
tradition that is unbending and inveterate. Uncompromising rigidity has been the
attitude of the courts of equity when petitioned to undermine the rule of undivided
loyalty by the 'disintegrating erosion' of particular exceptions. Only thus has the level of
conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will
not consciously be lowered by any judgment of this court.
Meinhard v. Salmon, supra, 249 NY at p. 464 (citation omitted).
2. The Court of Appeal Incorrectly Held That Vacatur Requires Diligence in Ferreting
out Fraud Even in Fiduciary Cases Where the Fiduciary Relationship Is Ongoing
During Arbitration and Where the Fiduciary Is Contractually Bound to Provide a Fair
Arbitration
In considering the test which should apply for purposes of vacatur in the particular
circumstances of this case, Petitioners urged the Court of Appeal to apply a general
fairness standard, in this context, that vacatur is permitted upon a showing of fraud
even if the unsuccessful party cannot show that he could not have discovered the lie.
The Court of Appeal rejected this argument, holding instead that, if the extrinsic fraud
rule did not control, the three part federal standard adopted by the Pour Le Bebe court
should apply.
The three part federal standard is that set forth in the case of Bonar v. Dean Witter
Reynolds, Inc. (11th Cir. 1988) 835 F.2d 1378 which the Pour Le Bebe court set forth
as follows:
First, the movant must establish the fraud by clear and convincing evidence. [Citations.]
Second, the fraud must not have been discoverable upon the exercise of due diligence
prior to or during the arbitration. [Citations.]
Third, the person seeking to vacate the award must demonstrate that the fraud
materially related to an issue in the arbitration. [Citations.]
Pour Le Bebe, supra, 112 Cal.App.4th at 830 (quoting Bonar v. Dean Witter Reynolds,
Inc., supra, 835 F.2d at p. 1383).
The Court of Appeal noted that the Pour le Bebe court, in applying principles of
statutory construction, "specifically rejected" a "general fairness" interpretation of
section 1286.2(a)(1). (Order at 17.) The Court of Appeal noted that the Pour le Bebe
court concluded '"[i]f the Legislature intended to permit an arbitration award to be
vacated whenever the prevailing party engages in tactic that might in any way seem
unfair, it would not have used the specific examples of fraud and corruption to describe
the type of "undue means" it had in mind." (112 Cal.App.4th at p. 827)'. (Order at 17.)
Petitioner's argument was not that vacatur should be permitted on any showing of
unfairness, however. It was that vacatur should be permitted in fiduciary cases on a
showing of fraud, made by a preponderance of the evidence, without having to meet
the burden of showing he could not have ferreted out the fraud (the so-called diligence
prong of the Bonar test). There is nothing in the language of section 1286.2(a)(1)
which prohibits such an interpretation (the section is silent as to the standard of proof
required for vacatur). Indeed, a reading of section 1286.2(a)(1) requiring a simple
showing of fraud comports with the general understanding of the words "fraud," and
"corruption" as used in the section. The Legislature intended that arbitration of medical
malpractice be judicially encouraged.5 Willful concealment of relevant evidence by a
party serves only to tear away at the arbitration process.
As one court has held when construing a statute similar to section 1286.2(a)(1),
"corruption," as used in the vacatur statutes, was defined as illegality, a vicious and
fraudulent intention to evade the prohibitions of the law, something against or
forbidden by law, moral turpitude, or exactly the opposite of honesty, involving
intentional disregard of law from improper motives, or an act done with an intent to give
some advantage inconsistent with official duty and the rights of others. (Teamsters
Local Union #11 Affiliated with International Brotherhood of Teamsters, etc. v Abad
(1975) 135 NJ Super 552, revd on other grounds 144 NJ Super 239 [arbitration award
vacated under "corruption" prong of statute, where employer consciously withheld
employee's production records from arbitration over propriety of employee's
discharge]).
The court added that since another provision of the statute allowed for vacating an
award in the event of "corruption in the arbitrators," the corruption mentioned in the
first provision must have referred to corruption on the part of one of the parties to the
arbitration procedure.
It is important to note that both Pour le Bebe and Bonar involved commercial actors
who stood at arm's length from their opponents and who were not subject to an over-
arching contractual duty to provide a fair arbitration to the opposing party.6 Pour le
Bebe involved a licensing dispute between two major corporations where one
corporation sought to vacate an adverse arbitration award on the grounds that counsel
for the other corporation had a conflict in representing the first corporation; Bonar
involved a dispute between a securities broker (Dean Witter) and investors in which
the broker sought to vacate an adverse award on the grounds that an expert witness
for the investors committed perjury. Under these circumstances, petitioners conceded,
the three-part federal vacatur test well may be appropriate.
Petitioners submit that, where, as here, one party owes fiduciary duties to the other,
where the fiduciary relationship is on-going at the time of arbitration, and where the
fiduciary also owes a contractual duty to provide a fair arbitration, that party should not
be permitted to obtain an award through fraud even if a skeptical opponent dealing at
arm's length might have rooted out the fraud during arbitration. The Court of Appeal
rejected this argument.
Although the Court of Appeal acknowledged that "a fiduciary relationship exists
between Rushford and his treating physicians in the context of his medical treatment,"
the court held that Petitioners nonetheless labored under a duty to investigate Kaiser's
representations as to treatment on the reasoning that, "once appellants filed their
medical malpractice claim, the parties dealt at arm's length with each other in the
arbitration proceedings. (See In re Marriage of Heggie (2002) 99 Cal.App.4th 28, 35)."
Petitioners submit that the Court's reasoning was wrong.
(a) A Physician Fiduciary Owes Particularly High Standards of Disclosure to His
Patients and the Patient Has No Duty to Investigate the Physician's Representations
As the Court of Appeal recognized, physicians stand in a fiduciary relationship with
their patients. (See, e.g., Stafford v. Shultz, (1954) 42 Cal. 2d 767, 775-779
[amputation case].) The relationship of patient and physician "is a fiduciary one of the
highest degree. It involves every element of trust, confidence and good faith." Lockett
v. Goodill (1967) 71 Wash.2d 654, 656; see also Lownsbury v. VanBuren (2002) 94
Ohio St. 3d 231, 235 ("The physician-patient relationship is a fiduciary one based on
trust and confidence and obligating the physician to exercise good faith."). The courts
recognize the unique vulnerability of a patient in medical treatment. (Cobbs v. Grant
(1972) 8 Cal.3d 229 [patients "abjectly dependent" on his doctor for information
required to make informed medical decision].)
The physician's fiduciary duties include following:
the duty of confidentiality (Business & Professions Code § 2263),
the duty of loyalty (State ex rel. McCloud v. Seier (Mo. 1978) 567 S.W.2d 127, 128;
Wargo v. Buck (1997) 123 Ohio App. 3d 110, 122), and, most important in the context
of this case,
the duty of disclosure (Moore v. Regents of University of California (1990) 51 Cal.3d
120, 131; Arato v. Avedon (1993) 5 Cal.4th 1172,1188; Pashley v. Pacific Elec. Co.
(1944) 25 Cal.2d 226, 235).
With respect to the duty of disclosure, in Garlock v. Cole (1962) 199 Cal. App. 2d 11,
16-17, the court held that a doctor owes a fiduciary duty to not misrepresent the
patient's medical condition, and the failure of a physician to disclose the true medical
facts would constitute the "most palpable fraud." The court stated that where there is
an ongoing treating relationship after malpractice is committed, the patient is entitled to
rely on the representations of his treating physicians and there is no duty for the
patient to investigate the truth of his doctor's representations. (Id at 16-17.) The
Garlock court stated: "[I]t is recognized that in cases involving such a relationship facts
which would ordinarily require investigation may not excite suspicion, and that the
same degree of diligence is not required." (Id., at 16-17 [citation omitted]). In Stafford
v. Shultz, supra, 42 Cal. 2d 767, 775-779, a case where the patient's leg was
amputated by doctors who made misrepresentations concerning the patient's medical
condition and failed to disclose the doctor's failure to perform diagnostic procedures
before misrepresenting that the mode of treatment would be effective, this Court held
that treating doctors have a fiduciary duty to fully disclose to the patient the true
medical facts regarding his medical condition and physical injuries.
Similarly, in Bowman v. McPheeters (1947) 77 Cal. App. 2d 795, 800-801, the court
ruled that a physician is prohibited from misrepresenting the nature and extent of a
patient's medical condition or injury and lulling the patient into ignorant security. This is
because as "fiduciaries it was the duty" of the physicians to "make a full and fair
disclosure" to the patient of "all facts which materially affected his rights and interests".
In Nelson v. Gaunt, (1981) 125 Cal. App. 3d 623, the court held that the patient had
the right to maintain both an action for fraud as well as malpractice against the
physician who made false and misleading statements to the patient and concealed
material information relevant to the patient's medical condition and medical treatment.
As one authority on the law of fiduciary duty has noted, once it arises, the duty of
disclosure must be discharged. R. Chalos, The Law of Fiduciary Duties (2000), § 3:41.
The duty of disclosure is unlike the other duties that make up the fiduciary bundle in
that it cannot be modified in the same way as the others. The other duties may be
modified either by agreement in advance or by agreement after the fact, or by court
order. They may be waived. But while the duty of disclosure may be modified
prospectively by legislation . . . it is not amenable to voluntary modification by the
parties. Instead, it must be discharged before any cestui can waive it and before a
court can declare it discharged.
(Id., emphasis added).
(b) The Institution of Litigation Does Not Convert an On-Going Fiduciary Relationship
into One at Arm's Length
The Court of Appeal held that "once appellants filed their medical malpractice claim,
the parties dealt at arm's length with each other in the arbitration proceedings." (Order
at 20.) The Court cited only In re Marriage of Heggie (2002) 99 Cal.App.4th 28, 35 in
support of this proposition. In re Marriage of Heggie has no application to this case
whatsoever. It involved a dissolution proceeding between a husband and wife, and
accordingly, a fiduciary relationship that was in the process of being terminated. Here,
by contrast, the fiduciary relationship was on-going and Petitioners were as "abjectly
dependent" on Kaiser's disclosure of medical judgments, representations and opinions
as they always had been.
There is no authority for the proposition that a physician in an on-going relationship
with his patient can absolve himself of all of his fiduciary obligations, particularly the
central obligation of disclosure, and act in his own interest merely upon institution of
adverse proceedings against him. Indeed, what little authority there is on the topic of a
fiduciary's duties in the context of adversarial proceedings brought by a beneficiary is
against the position taken by the Court of Appeal. For instance, in Sapp v. Superior
Court of State, in and for Los Angeles County (1953) 119 Cal.App.2d 645, a
dissolution case, the Court held that even though the husband/wife relationship
terminates as a matrimonial one, the spouse who manages the community assets
occupies a position of trust which is not terminated as to assets remaining in his hands.
That spouse retains his fiduciary duty to account to the other spouse for the
community property when the spouses are negotiating a property settlement (Id., 119
Cal.App.2d at p. 653). In Wells Fargo Bank v. Superior Court (Boltwood) (2000) 22 Cal.
4th 201, this Court considered the question of limits on a trustee's duty of disclosure
where attorney-client communications of the trustee are at issue. In Boltwood, a bank
trustee petitioned to settle its accounts and resign as co-trustee of a trust where the
beneficiaries had accused the bank of misconduct. The beneficiaries contended that
they were entitled to privileged communications between the bank and its attorney
retained in the matter of the petition.
The question before the Court was whether the trustee's duty to keep its beneficiaries
reasonably informed created an exception to the attorney-client privilege set forth in
the Evidence Code (section 954). This Court held that because the privileges set forth
in the Evidence Code are legislative creations which the courts have no power to
expand or admit exceptions to, the fiduciary's duty of disclosure did not require it to
reveal its own attorney-client communications which had occurred in the course of the
fiduciary's defense. (Id., 22 Cal at p. 206.) Importantly, the Court rested its conclusion
on the fact that the attorney-client privilege was a creature of statute which was not
susceptible to modification by the Court. The Court explicitly noted that "[i]n most of the
other jurisdictions in which this question has arisen, courts have given the trustee's
reporting duties precedence over the attorney-client privilege. . . . But those courts
consider themselves free, in a way we do not, to create exceptions to the privilege."
(Id., 22 Cal at p. 208.) "What courts in other jurisdictions give as common law privileges
they may take away as exceptions. We, in contrast, do not enjoy the freedom to restrict
California's statutory attorney-client privilege based on notions of policy or ad hoc
justification." (Id., 22 Cal at p. 209.)
Petitioners submit that, where as here, no statutory provision supervenes over the
fiduciary duty to disclose, the fiduciary remains bound by his duties even in the context
of adverse litigation. The rationale for the fiduciary exception to the extrinsic fraud rule
is that where a duty is owed to the other party and is breached during litigation, the
policy of allowing a defrauded party to seek relief outweighs the policy in favor of
finality of judgments. This is because the confidential relationship gives rise to a
fiduciary duty that must be honored even during an adversarial litigation between the
fiduciary and the party to whom the duty is owed. In such an instance, the fiduciary
owes the other party a duty of honesty and full disclosure of all material facts. (In re
Marriage of Modnick (1983) 33 Cal. 3d 897, 904-905 [husband testified falsely at trial
and failed to disclose assets and judgment was set aside as the wife was deprived of
the ability to fully present her case].)
An additional reason for refusing to relax fiduciary standards exists in this case and
every case where an HMO controls the arbitration process used by its patients: Kaiser
owed an independent, contractual duty to provide a fair arbitration to Mr. Rushford.
In Engalla v. Permanente Medical Group, Inc., et. al. (1997) 15 Cal. 4th 951; 980- 989,
this Court held that Kaiser owes its members contractual obligations to conduct a fair
arbitration and may not engage in fraudulent conduct intrinsic to an arbitration. This
Court in Engalla harshly criticized Kaiser's system, noting the wide "gap between its
contractual representations and the actual workings of its arbitration program". (Id., at
986-987.) Justice Kennard's concurring opinion states that it is the essential role of the
courts to determine whether a medical malpractice patient has received a fair
arbitration, and where unfair conduct procures Kaiser a favorable award, then it is the
duty of the trial court to vacate the award. (Id, 988-989.) Citing Section 1286.2, Justice
Kennard further stated that where there is unfair procedural or substantive conduct
during a private arbitration that "affects the arbitration award, it may form the basis for
vacating the award as one 'procured by corruption, fraud or other undue means." (Id.,
988-989 [emphasis added].)
Kaiser's Blue Ribbon Advisory Panel formed in response to this Court's criticism in
Engalla of Kaiser's arbitration system, concludes under the Section "Arbitration and the
Duty of Kaiser Permanente": "Imposing a mandatory arbitration system means that
Kaiser Permanente is implicitly representing to its members that the system is fair,
reasonable and just. We strongly believe Kaiser Permanente must honor this
representation." The duties outlined by the panel include a "duty to guarantee…
essential fairness." Contractual arbitrations must operate with a minimum level of
integrity -- otherwise arbitration would cease to qualify as an adequate mechanism to
secure individual redress for damages. Hines v. Anchor Motor Freight, Inc. (1976) 424
U.S. 554, 568 [finality clause of arbitration contract was unenforceable and arbitration
decision was set aside due to union's breach of duty to its member during the
arbitration]. An award procured by false testimony must be vacated where a participant
breaches a contractual duty owed the other party. (Hines. supra, 424 U.S. at 568-571).
Accordingly, Kaiser's fraud during its contractually-imposed arbitration process
deprives it of arm's length status.
IV. CONCLUSION
This case presents an important issue of first impression going to the heart of the
fairness and integrity of mandatory arbitration schemes in medical malpractice cases.
Review is necessary in order to settle the question of the standard for vacatur of
medical malpractice arbitration awards procured by fraud where the treating
relationship is ongoing and the physician has a contractual obligation to provide a fair
arbitration. Petitioners submit that the appropriate standard in these cases is one of a
simple showing that fraud had been committed, rather than satisfaction of any
heightened vacatur standard. Accordingly, the Petition for Review should be granted.
DATED: May 31, 2005
Respectfully submitted,
Sharonrose Cannistraci, Esq.
Mary McNamara, Esq.
Attorneys for Petitioners
TABLE OF AUTHORITIES
CALIFORNIA STATE CASES
Arato v. Avedon (1993) 5 Cal.4th 1172, 1188 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .24
Bowman v. McPheeters (1947) 77 Cal. App. 2d 795, 800-801. . . . . . . . . . . . . . . . . . . .
. . . . . . . . .25
Cobbs v. Grant (1972) 8 Cal.3d 229 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .24
Coon v. Nicola (1993) 17 Cal.App.4th 1225 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,
n.5
Engalla v. Permanente Medical Group, Inc., et. al. (1997) 15 Cal. 4th 951; 980-989 . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .30, 31
Estate of Anderson (1983) 149 Cal. App. 3d 336 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 17
Estate of Sanders (1985) 40 Cal. 3d 607 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 18
Garlock v. Cole (1962) 199 Cal. App. 2d 11, 16-17 . . . . . . . . . . . . . . . . . . . . . . . . . . .
24, 25
In re Marriage of Heggie (2002) 99 Cal. App. 4th 28, 35 . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 23, 27
In re Marriage of Modnick (1983) 33 Cal. 3d 897, 904-905 . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 29
Lamb v. Holy Cross Hospital (1978) 83 Cal. App. 3d 1007 . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 13
Mansdorf v. California Physicians' Service, Inc. (1978) 87 Cal. App. 3d 412 . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Moore v. Regents of University of California (1990) 51 Cal. 3d 120, 131 . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 24
Nelson v. Gaunt (1981) 125 Cal. App. 3d 623 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 26
Pacific Crown Distributors v. Brotherhood of Teamsters and Auto Truck Drivers, Local
70 (1986)183 Cal.App.3d 1138 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15-16
Pashley v. Pacific Elec. Co. (1944) 25 Cal.2d 226, 235 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 24
Pico v. Cohn (1891) 91 Cal. 129 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12-
13
Pour Le Bebe, Inc. v. Guess? Inc (2003) 112 Cal.App.4th 810. . . . . . . . . . . . . . . . . . . .
. . . 9, 14-15, 19-20, 22
Rios v. Allstate Ins. Co. (1977) 68 Cal. App. 3d 811 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 13
Rosenfeld v. Superior Court (1983) 143 Cal.App.3d 198 . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 21, n.5
Sapp v. Superior Court of State, in and for Los Angeles County (1953) 119 Cal. App.
2d 645, 653 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Stafford v. Shultz (1954) 42 Cal. 2d 767, 775-779 . . . . . . . . . . . . . . . . . . . . . . . . . . .
23-24, 25
Wells Fargo Bank v. Superior Court (Boltwood) (2000) 22 Cal.4th 201, 206, 208, 209 .
. . . . . . . . . . . . . . . . . . . . . . . . 28, 29
OTHER STATE CASES
Kloss v. Edward D. Jones & Co. (2002) 310 Mont. 123 . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 22, n. 6
Lockett v. Goodill (1967) 71 Wash.2d 654, 656 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 24
Lownsbury v. VanBuren (2002) 94 Ohio St.3d 231, 235 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .24
Meinhard v. Salmon (1928) 249 NY 458 . . . . . . . . . . . . . . . . . . . . . . . 18-19
State ex rel. McCloud v. Seier (Mo. 1978) 567 S.W.2d 127, 128 . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 24
Teamsters Local Union #11 Affiliated with International Brotherhood of Teamsters, etc.
v Abad (1975) 135 NJ Super 552 revd on other grounds 144 NJ Super 239 . . . . . . . . .
. . . . . . . . . . . . . . . . 21
Wargo v. Buck (1997) 123 Ohio App.3d 110, 122 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 24
FEDERAL CASES
Bonar v. Dean Witter Reynolds, Inc. (11th Cir. 1988) 835 F.2d 1378 . . . . . . . . . . . . . . .
. . . . . . . . 15, n.4, 19-20
Dogherra v. Safeway Stores, Inc. (9th Cir. 1982) 679 F.2d 1293 cert denied 459 U.S.
990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, n.4
Hines v. Anchor Motor Freight, Inc. (1976) 424 U.S. 554, 568, 568-571 . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .31
Intern. Broth. Teamsters, Local 519 v. U.P.S. (6th Cir. 2003) 335 F.3d 497 . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 15, n.4
Newark Stereotypers' U. No. 18 v. Newark Morning Ledger Co. (3d Cir. 1968) 397 F.2d
594 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, n.4
OTHER AUTHORITIES
8 Witkin, Cal. Procedure (4th ed. 1997) Attack on Judgment in Trial Court, § 223 . . . . .
. . . . . . . . 11
11 C. Wright & A. Miller Federal Practice and Procedure p. 2868 (1973) . . . . . . . . . . . .
. . . . . . . . 12
22 A.L.R. 4th 366 (1983, updated December 2003) What Constitutes Corruption,
Fraud, or Undue Means in Obtaining Arbitration Award Justifying Avoidance of Award
Under State Law . . . . . . . . . . . . . . . . . . . . . . . . 14, n.3
Business & Professions Code § 2263 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
California Code of Civil Procedure § 1286.2(a)(1) and § 1287 . . . . passim
Fed.R.Civ.P 60(b)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Freeman, Judgments (5th ed. 1925), Section 1235, p. 2576 . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 17
Ian R. MacNeil, American Arbitration Law (1992) 15- 25 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 22, n.6
Jerold S. Auerbach, Justice Without Law? (1983) 101-114 . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 22, n.6
Margaret M. Harding, The Redefinition of Arbitration by Those with Superior Bargaining
Power
1999 UTAH L. REV. 857 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, n.6
R. Chalos, The Law of Fiduciary Duties (2000) § 3:41 . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 26
Rest.2d, Judgments §70 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Footnotes
1 The facts of the course of treatment are set forth more fully in the Court of Appeal's
Order at pages 2-4.
2 All further unspecified statutory references are to the Code of Civil Procedure.
3 Other states have long held that false testimony and intrinsic fraud constitute
grounds for vacating an arbitration award. (See 22 A.L.R. 4th 366 (1983, updated
December 2003), entitled "What Constitutes Corruption, Fraud, or Undue Means in
Obtaining Arbitration Award Justifying Avoidance of Award Under State Law.)
4 Among others, the court cited to Intern. Broth. Teamsters, Local 519 v. U.P.S. (6th
Cir. 2003) 335 F.3d 497 [false testimony grounds for vacating an award]; Newark
Stereotypers' U. No. 18 v. Newark Morning Ledger Co. (3d Cir. 1968) 397 F.2d 594,
598 ["We may assume that the obtaining of an award by perjured testimony would
constitute fraud under [9 U.S.C.] § 10(a)]; Dogherra v. Safeway Stores, Inc. (9th Cir.
1982) 679 F.2d 1293, 1297; cert denied 459 U.S. 990 ["Obtaining an [arbitration]
award by perjured testimony constitutes fraud" and grounds for vacating the award];
Bonar v. Dean Witter Reynolds, Inc. (11th Cir. 1988) 835 F.2d 1378 [award vacated in
part to delete damages testified to by expert witness who gave false testimony in
stating credentials].
5 Section 1295 of Title 9.1 was adopted in 1975 to alleviate the escalating costs of
medical malpractice insurance premiums (and resulting problems of health care
availability) due to the surge of medical malpractice actions and high jury awards.
(Rosenfeld v. Superior Court (1983) 143 Cal.App.3d 198). Its basic function was to
establish uniform language and mandate the conspicuous appearance of arbitration
clauses in medical services contracts. The result is to bind patients to arbitration
contracts that could otherwise be challenged as adhesion contracts. (Coon v. Nicola
(1993) 17 Cal.App.4th 1225.)
6 Historically, arbitration was designed as a method of alternative dispute resolution
between merchants of equal sophistication and bargaining power. (See, e.g., Kloss v.
Edward D. Jones & Co. (2002) 310 Mont. 123, 142 n. 3 (Nelson, J., concurring); see
also Jerold S. Auerbach, Justice Without Law? 101-114 (1983); Ian R. MacNeil,
American Arbitration Law 15- 25 (1992); Margaret M. Harding, The Redefinition of
Arbitration by Those with Superior Bargaining Power, 1999 UTAH L. REV. 857, 857
(1999).) dy>
STATEMENT OF ISSUE PRESENTED FOR REVIEW
Whether the standard for vacatur of a medical malpractice arbitration award procured
by the fraud of a physician-fiduciary requires satisfaction of the extrinsic fraud rule or a
showing that fraud could not have been discovered through diligence, rather than a
simple showing that fraud had been committed, where the treating relationship is
ongoing and the physician has a contractual obligation to provide a fair arbitration.
Court of Appeal No. A104598
San Mateo County Super. Ct. No. CIV413484
No. ___________ IN THE SUPREME COURT OF CALIFORNIA
GARY RUSHFORD et al, Petitioners,
v.
KAISER FOUNDATION HOSPITALS, et al., Respondents.
PETITION FOR REVIEW OF DECISION OF THE COURT OF APPEAL FIRST
APPELLATE DISTRICT
SHARONROSE CANNISTRACI (CSBN 121827)
99 Almaden Boulevard, Suite 925
San Jose, CA 95113
Tel: 408/ 297 5400 (sharonrose@cannistracilaw.com)
MARY McNAMARA (CSBN 147131)
SWANSON & McNAMARA LLP
300 Montgomery Street, Suite 1100
San Francisco, CA. 94108
Tel: 415/ 477 3800 (mmcnamara@swansonmcnamara.com)
Attorneys for Petitioners
TABLE OF CONTENTS
STATEMENT OF ISSUE PRESENTED FOR REVIEW
I. INTRODUCTION
II. BACKGROUND
III. ARGUMENT
A. The Court of Appeal's Order Affirming the Judgment in this Case Raises An
Important Question of Law That Was Wrongly Decided
1. The Court of Appeal Incorrectly Assumed That the Extrinsic Fraud Rule Applies in
the Context of Vacatur of Arbitration Awards
(a) The Extrinsic Fraud Rule Should Not Apply in the Context of Unconfirmed
Arbitration Awards
(b) The Extrinsic Fraud Rule in Any Event Should Not Be Applied in Fiduciary Cases
2. The Court of Appeal Incorrectly Held That Vacatur Requires Diligence in Ferreting
out Fraud Even in Fiduciary Cases Where the Fiduciary Relationship Is Ongoing
During Arbitration and Where the Fiduciary Is Contractually Bound to Provide a Fair
Arbitration
(a) A Physician Fiduciary Owes Particularly High Standards of Disclosure to His
Patients and the Patient Has No Duty to Investigate the Physician's Representations
(b) The Institution of Litigation Does Not Convert an On-Going Fiduciary Relationship
into One at Arm's Length
IV. CONCLUSION
TABLE OF AUTHORITIES
Footnootes
STATEMENT OF ISSUE PRESENTED FOR REVIEW
Whether the standard for vacatur of a medical malpractice arbitration award procured
by the fraud of a physician-fiduciary requires satisfaction of the extrinsic fraud rule or a
showing that fraud could not have been discovered through diligence, rather than a
simple showing that fraud had been committed, where the treating relationship is
ongoing and the physician has a contractual obligation to provide a fair arbitration.
Petitioners respectfully ask this Court to review the unpublished decision of a panel of
the Court of Appeal, First Appellate District, affirming the judgment of the San Mateo
County Superior Court which confirmed an adverse medical malpractice award against
them after denying their petition to vacate it on grounds of "corruption, fraud or other
undue means" within the meaning of California Code of Civil Procedure Section
1286.2, subdivision (a)(1). A true and correct copy of the Order of the Court of Appeal,
filed April 18, 2005, is attached as Exhibit 1 to this Petition.
I. INTRODUCTION
This is a medical malpractice case involving limb amputation in which the physician
parties procured an arbitration award during the course of treatment by
misrepresenting the nature of blood work ups that they conducted and by concealing
records that contradicted their litigation position at arbitration. Within the time period
allowed for vacatur, the patient petitioned to vacate the unconfirmed award on the
grounds that it was procured by his treating physicians via "corruption, fraud or other
undue means" within the meaning of California Code of Civil Procedure Section
1286.2, subdivision (a)(1). The trial court denied the petition, resting its ruling on the
extrinsic fraud rule. The Court of Appeal affirmed, holding that institution of a
malpractice claim converts an on-going doctor/patient relationship into an arm's length
adversarial relationship for purposes of arbitration, relieving physicians of the fiduciary
duty of disclosure owed in treatment, and imposing on patients heightened vacatur
rules which require proof that the fraud could not have been unearthed during the
arbitration through exercise of diligence.
In divesting physicians of their duty of disclosure upon institution of a malpractice
claim, the Court of Appeal's decision inappropriately extends legal principles designed
for the marketplace to the realm of on-going fiduciary relationships. As such, the
Court's decision contradicts the line of authority which imposes higher duties on
fiduciaries in their dealings with beneficiaries and it runs counter to sound public policy
requiring fiduciaries to continue to honor their core fiduciary duty of disclosure even
where the beneficiary institutes legal proceedings against them.
Kaiser is the largest HMO and medical provider in California and in the United States. It
has operations throughout northern and southern California and over eight million
members nationwide. The issue in this appeal raises an important public policy
question regarding the fairness and integrity of Kaiser's mandatory, medical
malpractice arbitration system, which features a contractual promise to provide
patients a fair arbitration. The question is especially important given that patients are
captive in the Kaiser system, even after institution of malpractice claims, and are rarely
in a position to search elsewhere for medical care. As such, they are abjectly
dependent on their physicians to continue to comply with their duty of full disclosure.
The physician fraud perpetrated by Kaiser in this case deprived the patient of his day
in court on the malpractice that was committed. The Court of Appeal held that the
patient has no remedy in this case because his act of instituting a malpractice case
released the physicians from their fiduciary duty of full disclosure. Such a result has no
basis in the law and flouts the strong public policy protecting patients in the context of
mandatory arbitration schemes.
II. BACKGROUND
This is a medical malpractice case against Kaiser Foundation Hospitals, Kaiser
Foundation Health Plan, Inc. and Permanente Medical Group, Inc. ("Kaiser") by Gary
Rushford and his wife Sharon Rushford arising out of Kaiser's amputation of Gary
Rushford's right leg some seven years ago. The pertinent facts for purposes of this
petition are as follows:
In 1998, Gary Rushford experienced a series of clotting episodes in the arteries of his
right leg. Kaiser hospitalized him for thrombolysis treatment, but after each episode
released him without adequate, or any, levels of anti-clotting medication. In July 1998,
still without anti-clotting medication, Gary Rushford's condition had deteriorated to a
point where Kaiser could no longer treat him with thrombolysis. At that time, Kaiser
performed blood tests in an effort to determine if he had a hypercoagulable condition (i.
e., abnormal clotting of the blood) that could be treated by anti-clotting medication.
Kaiser's July 1998 blood tests were negative for such condition. In late July 1998, after
a series of increasingly invasive surgeries, Kaiser amputated his right leg above the
knee. (Order at pp. 2-3). Gary Rushford was placed on anti-clotting medication
thereafter and remained on it for the next three years with no recurrence of clotting in
his legs. (Id., at p. 3) 1
At the medical malpractice arbitration that followed, the Rushfords contended that the
loss of Gary Rushford's leg was caused by a hypercoagulable condition which was
controllable by anti-clotting medication and that Kaiser's failure to administer such
medication constituted malpractice. Kaiser contended that it acted within the standard
of care and that other conditions (i.e., conditions other than a hypercoagulable
condition which was unresponsive to anti-clotting medication) caused the loss of Gary
Rushford's leg. (Order at p. 5)
In discovery, Kaiser produced its blood test results for Gary Rushford. (Order at p. 5)
After the close of evidence, but before issuance of the award, the arbitrator received
from the Rushfords' attorney a letter from Gary Rushford's treating physician
addressed to a Stanford consultant. The letter described Mr. Rushford's history of
clotting problems and treatment and requested an evaluation for a hypercoagulable
condition. (Id.) The request in this letter contradicted Kaiser's litigation position that a
hypercoagulable state was not the cause of Mr. Rushford's condition. The arbitrator
found that Kaiser had breached the standard of care in failing to treat with anti-clotting
medication before amputating the leg (Order at p. 1) but the arbitrator also found that
the evidence was evenly balanced on the issue of causation (i.e., that the failure to
treat with anticlotting medication caused the condition resulting in amputation).
Accordingly, the arbitrator ruled against the Rushfords for failing to carry their burden
of proof on causation.
After the arbitrator rendered his decision, Gary Rushford tested positive at Stanford for
a hypercoagulable condition that is controllable by anti-clotting medication. (Order at
pp. 1, 6). It was in this manner that the Rushfords discovered that Kaiser had failed to
perform a crucial test for hypercoagulable state, despite representations to the
contrary.
Pursuant to California Code of Civil Procedure §1286.2, subd. (a)(1) (Section 1286.2
(a)(1)),2 the Rushfords filed a petition to vacate the award on the grounds that it was
procured by "corruption, fraud or other undue means." (Order at p. 6.) The Rushfords
contended that Kaiser repeatedly misrepresented that they had performed all available
blood tests to rule out the possibility that Gary Rushford had a hypercoagulable
condition and misrepresented that all tests for a hypercoagulable condition were
negative.
The trial court denied the Rushfords' petition to vacate the award, holding that the
extrinsic fraud rule applied to this arbitration and finding that the Rushfords had an
opportunity to conduct discovery as to the extent of Kaiser's testing thereby barring
vacatur. (Order at pp. 12, 22)
The Court of Appeal affirmed the judgment of the trial court.
While the Court acknowledged that a fiduciary relationship exists between Petitioner
Rushford and his treating physicians in the context of medical treatment, it held that,
upon institution of the malpractice claim, the parties dealt at arm's length with each
other in the arbitration proceedings. (Order at p. 20). In the context of this arm's length
relationship, the Court held, vacatur was barred because Kaiser's fraud was intrinsic to
the arbitration proceedings, or, alternatively, because Petitioners had failed to exercise
diligence in unearthing the fraud.
III. ARGUMENT
A. The Court of Appeal's Order Affirming the Judgment in this Case Raises An
Important Question of Law That Was Wrongly Decided
The question of law as to what standard should control vacatur of unconfirmed
arbitration awards in cases such as this is one of first impression. Neither this Court
nor any Court of Appeal in a published opinion has considered it. Because of the
enormous number of cases subject to Kaiser's mandatory arbitration system, the issue
in this case raises an important question of law.
In arriving at its decision, the Court of Appeal applied both the traditional extrinsic fraud
rule of vacatur and the three-pronged federal rule of vacatur as adopted by the Court
of Appeal for the Second Appellate District in the non-fiduciary case of Pour Le Bebe,
Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810.
Neither rule should control in the circumstances of this case, where a patient is in an
on-going treating relationship with his physician during a proceeding which is an
arbitration.
With respect to the extrinsic fraud rule, review is required not only because application
of the rule in a doctor/patient setting is a novel one which raises an important question
of law, but a conflict exists between the Courts of Appeal for the First and Second
Appellate Districts as to the continued viability of the rule, especially in the context of
arbitration cases in general. Many Court of Appeal cases recognize a "fiduciary
exception" to the rule and procedural reform has led the federal courts to abandon it
entirely for all cases. This Court should secure uniformity of decisionmaking in
California and settle the important question of law in favor of holding that the extrinsic
fraud rule does not apply in the context of arbitration cases involving claims of fiduciary
breach.
With respect to Court of Appeal's application of the federal vacatur rule, which requires
the movant to show 1) that fraud exists by clear and convincing evidence; 2) that the
fraud was not discoverable upon exercise of reasonable diligence before or during the
arbitration, and 3) that the fraud materially related to an issue in the arbitration, no
California case applies these standards to actions involving fiduciaries, still less to
fiduciaries who are in on-going fiduciary relationships at the time of the arbitration, and
who are contractually bound by a covenant of fairness as Kaiser was here. Petitioners
submit that the correct standard in such a case is one of a showing of fraud by a
preponderance of the evidence, that the fraud was material to an issue at the
arbitration and that there be no requirement to show diligence in investigation. Unless
this Court settles the standard that applies in such cases, patients throughout
California who, like Petitioners, are forced into arbitration and are captive in on-going
treating relationships with the same doctors against whom they are arbitrating, will be
denied the ability to make fundamental treatment decisions
1. The Court of Appeal Incorrectly Assumed That the Extrinsic Fraud Rule Applies in
the Context of Vacatur of Arbitration Awards
(a) The Extrinsic Fraud Rule Should Not Apply in the Context of Unconfirmed
Arbitration Awards
The extrinsic fraud rule provides that once a judgment is final, parties in a civil lawsuit
ordinarily will not be permitted to set a final judgment aside and re-litigate the issues
previously determined in the action, except in those cases where the fraud is extrinsic
to the questions determined in the action. (Pico v. Cohn (1891) 91 Cal. 129, 133-134).
"Extrinsic" fraud in this context means fraud of a kind which keeps the unsuccessful
party from having a trial at all, as opposed to having a trial which is rendered unfair by
perjury or withholding of evidence. (Id.; see also, 8 Witkin, Cal. Procedure (4th ed.
1997) Attack on Judgment in Trial Court, § 223, p. 727 ["The most common ground for
equitable relief [from a final judgment] is extrinsic fraud, a broad concept that covers a
number of situations. Its essential characteristic is that it has the effect of preventing a
fair adversary hearing, the aggrieved party being deliberately kept in ignorance of the
action or proceeding, or in some other way fraudulently prevented from presenting his
claim or defense"].)
The extrinsic fraud rule has long been criticized as difficult to apply and lacking in a
sound basis in policy. (11 C. Wright & A. Miller, Federal Practice and Procedure (1973)
p. 2868, at 240-241- "[It] rests on cloudy and confused authorities, its soundness as a
matter of policy is very doubtful, and it is extremely difficult to apply."). The
Restatement abandoned it (Rest.2d, Judgments §70) and it has been formally
abolished by Congress. It is not applicable to a motion to vacate a federal judgment
based on intrinsic fraud. See Fed.R.Civ.P 60(b)(3) [court may relieve a party from a
final judgment for fraud whether denominated "intrinsic" or "extrinsic"]. Federal
authorities question whether the extrinsic fraud rule remains authoritative even in a
separately filed federal action and not just on motion in the same action. (Id.)
The extrinsic fraud rule grew out of cases where final judgments were entered after full
trials, not cases where awards were entered after summary arbitration proceedings.
The motive force behind the extrinsic fraud rule was the strong judicial policy favoring
finality of judgments.
[T]here must be an end of litigation, and when parties have once submitted a matter,
or have had the opportunity of submitting it, for investigation and determination in the
same proceeding, it must be regarded as final and conclusive, unless it can be shown
that the jurisdiction of the court has been imposed upon, or that the prevailing party,
by some extrinsic or collateral fraud, has prevented a fair submission of the
controversy.
(Pico v. Cohn, supra, 91 Cal. at pp. 133-134.)
Where, as here, the proceeding at issue is an arbitration which produces an award not
yet confirmed, the extrinsic fraud rule should not apply for the separate reason that no
final judgment exists whose finality must be enforced. "An award that has not been
confirmed or vacated [by the superior court] has the same force and effect as a
contract in writing between the parties to the arbitration." (§ 1287.6.)
Although the Court of Appeal rejected this argument (Order at 14), a trio of cases from
1978 contains dicta that a more relaxed vacatur standard does apply when the award
has not been confirmed as a judgment. See, e.g., Lamb v. Holy Cross Hospital (1978)
83 Cal. App. 3d 1007, 1011; [hospital and doctors concealment of medical records
during arbitration constituted intrinsic fraud and patient's remedy was to petition trial
court to "vacate the award" before it was confirmed and became a final judgment]; Rios
v. Allstate Ins. Co. (1977) 68 Cal. App. 3d 811, 818-819 [insured's remedy against
insurer who procured award by false testimony (intrinsic fraud) was to file a petition to
vacate the award] and Mansdorf v. California Physicians' Service, Inc. (1978) 87 Cal.
App. 3d 412 [citing with approval the language in Rios where defendant procured
award by "what amounted to intrinsic fraud, and held that conduct could, and should,
have been raised" by a petition to vacate under section 1286.2].
More recently, the Court of Appeal for the Second Appellate District in Pour Le Bebe,
Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810 held that the extrinsic fraud rule should
be abandoned in arbitration cases.3 (Without holding that the extrinsic fraud rule
should be abandoned, the Court of Appeal in this case cited the Pour Le Bebe opinion
favorably. Order at 16-17.) Recognizing the extrinsic fraud rule's roots as a measure
geared toward finality of outcomes in fully-contested trials, the Pour Le Bebe court held
that the parties to an arbitration are "not afforded the full panoply of procedural rights
available to civil litigants." Accordingly, "courts generally take a more lenient approach
when examining intrinsic fraud in the context of a motion to vacate an arbitration
award" than courts would to a motion to vacate a final judgment. (Id, at 828-829.) The
Pour Le Bebe court cited a number of federal cases 4 which deemed arbitration
awards subject to vacatur for intrinsic fraud, including false testimony (id., at 829-30).
Petitioners note that Pour Le Bebe conflicts with other Court of Appeal cases which
applied the traditional extrinsic fraud rule. For example, in the earlier case of Pacific
Crown Distributors v. Brotherhood of Teamsters and Auto Truck Drivers, Local 70
(1986)183 Cal.App.3d 1138, the Court of Appeal for the First Appellate District applied
the extrinsic fraud rule to vacate an award secured as a result of a new issue
presented for the first time in a post-arbitration brief by a party which had previously
stipulated that the issues were limited in a manner that excluded the newlyraised issue.
The Court held that this conduct subverted the fairness of the hearing and
"intentionally and fraudulently deprived [respondent] of its opportunity to present
evidence in an arbitration . . . ." (Pacific Crown Distributors, supra, 183 Cal.App. at p.
1149.)
In light of the conflict amongst the divisions of the appellate courts as to application of
the extrinsic fraud rule in arbitration cases, and in light of the policy reasons
undermining application of the rule to unconfirmed arbitration awards, review is
necessary in order to secure uniformity of decision. Petitioners submit that this Court
should follow the reasoning in Pour Le Bebe and the federal cases insofar as it
supports the abandonment of the extrinsic fraud rule in arbitration cases.
(b) The Extrinsic Fraud Rule in Any Event Should Not Be Applied in Fiduciary Cases
The Court of Appeal recognized that, in what it termed "very limited circumstances," the
"courts have applied the exception or found extrinsic fraud where there is a fiduciary
relationship between the parties and one party conceals or misrepresents information
that does not preclude the other party from participating in the proceedings, but does
prevent the party from fully presenting his or her case." (Order at 18.) The Court went
on to suggest however, that these cases were limited to instances such as dissolution
proceedings, where one spouse conceals assets from the other in a manner not
discernible through reasonable investigation. (Id. at 18-19, emphasis added, citing In
re Marriage of Stevenot (1984) 154 Cal.App.3d at pp. 1060-1068 and cases cited
therein; Kuehn v. Kuehn (2000) 85 Cal.App.4th 824, 832; In re Marriage of Modnick
(1983) 33 Cal.3d 897, 905-906.) Despite this statement, the Court appeared to
concede that the case of Estate of Anderson (1983) 149 Cal. App. 3d 336, rehearing
denied; petition to Supreme Court denied, was a case where reasonable investigation
would have uncovered the fraud and thus, that the fiduciary exception does not require
diligence on the part of the beneficiary. (Order at 19.)
In Estate of Anderson, an executor bank concealed and misstated facts regarding the
sale of estate property and related tax issues from beneficiaries even though it gave
actual notice of the hearing to the beneficiaries. The Court's characterization of the
cases notwithstanding, it is well-settled that:
The failure to perform the duty to speak or make disclosures which rests upon one
because of a trust or confidential relation is obviously a fraud, for which equity may
relieve from a judgment thereby obtained, even though the breach of duty occurs
during a judicial proceeding and involves false testimony and this is true whether such
fraud be regarded as extrinsic or as an exception to the extrinsic fraud rule.
(Freeman, Judgments (5th ed. 1925), Section 1235, p. 2576, cited in In re Marriage of
Modnick, supra 33 Cal. 3d at pp. 905-906 [husband's false testimony at trial and failure
to disclose assets is grounds for vacating final judgment as a fiduciary has a duty to
make full disclosure of all material facts].
Indeed, it is precisely because fiduciaries are held to far higher standards of conduct
than arm's length actors, that courts have vacated judgments where they have been
obtained on the basis of even intrinsic fraud. (Estate of Sanders (1985) 40 Cal. 3d
607, 615 [some courts deem the fiduciary's fraud to constitute 'extrinsic' fraud, while
other courts hold a fiduciary's fraud constitutes an 'exception' to the extrinsic fraud
rule, but in either case, however denominated, fiduciary fraud constitutes grounds for
vacating a judgment].)
In sum, the very sine qua non of the fiduciary relationship is that it is one of trust and
confidence which entitles the beneficiary to rely on the fiduciary's honesty and honor
without having to verify his representations. In the seminal case of Meinhard v. Salmon
(1928) 249 NY 458, Chief Justice Cardozo set forth the lofty standards to which
fiduciaries are held:
Many forms of conduct permissible in a workaday world for those acting at arm's length
are forbidden to those bound by fiduciary ties. A trustee is held to something stricter
than the morals of the market place. Not honesty alone, but the punctilio of an honor
the most sensitive, is then the standard of behavior. As to this there has developed a
tradition that is unbending and inveterate. Uncompromising rigidity has been the
attitude of the courts of equity when petitioned to undermine the rule of undivided
loyalty by the 'disintegrating erosion' of particular exceptions. Only thus has the level of
conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will
not consciously be lowered by any judgment of this court.
Meinhard v. Salmon, supra, 249 NY at p. 464 (citation omitted).
2. The Court of Appeal Incorrectly Held That Vacatur Requires Diligence in Ferreting
out Fraud Even in Fiduciary Cases Where the Fiduciary Relationship Is Ongoing
During Arbitration and Where the Fiduciary Is Contractually Bound to Provide a Fair
Arbitration
In considering the test which should apply for purposes of vacatur in the particular
circumstances of this case, Petitioners urged the Court of Appeal to apply a general
fairness standard, in this context, that vacatur is permitted upon a showing of fraud
even if the unsuccessful party cannot show that he could not have discovered the lie.
The Court of Appeal rejected this argument, holding instead that, if the extrinsic fraud
rule did not control, the three part federal standard adopted by the Pour Le Bebe court
should apply.
The three part federal standard is that set forth in the case of Bonar v. Dean Witter
Reynolds, Inc. (11th Cir. 1988) 835 F.2d 1378 which the Pour Le Bebe court set forth
as follows:
First, the movant must establish the fraud by clear and convincing evidence. [Citations.]
Second, the fraud must not have been discoverable upon the exercise of due diligence
prior to or during the arbitration. [Citations.]
Third, the person seeking to vacate the award must demonstrate that the fraud
materially related to an issue in the arbitration. [Citations.]
Pour Le Bebe, supra, 112 Cal.App.4th at 830 (quoting Bonar v. Dean Witter Reynolds,
Inc., supra, 835 F.2d at p. 1383).
The Court of Appeal noted that the Pour le Bebe court, in applying principles of
statutory construction, "specifically rejected" a "general fairness" interpretation of
section 1286.2(a)(1). (Order at 17.) The Court of Appeal noted that the Pour le Bebe
court concluded '"[i]f the Legislature intended to permit an arbitration award to be
vacated whenever the prevailing party engages in tactic that might in any way seem
unfair, it would not have used the specific examples of fraud and corruption to describe
the type of "undue means" it had in mind." (112 Cal.App.4th at p. 827)'. (Order at 17.)
Petitioner's argument was not that vacatur should be permitted on any showing of
unfairness, however. It was that vacatur should be permitted in fiduciary cases on a
showing of fraud, made by a preponderance of the evidence, without having to meet
the burden of showing he could not have ferreted out the fraud (the so-called diligence
prong of the Bonar test). There is nothing in the language of section 1286.2(a)(1)
which prohibits such an interpretation (the section is silent as to the standard of proof
required for vacatur). Indeed, a reading of section 1286.2(a)(1) requiring a simple
showing of fraud comports with the general understanding of the words "fraud," and
"corruption" as used in the section. The Legislature intended that arbitration of medical
malpractice be judicially encouraged.5 Willful concealment of relevant evidence by a
party serves only to tear away at the arbitration process.
As one court has held when construing a statute similar to section 1286.2(a)(1),
"corruption," as used in the vacatur statutes, was defined as illegality, a vicious and
fraudulent intention to evade the prohibitions of the law, something against or
forbidden by law, moral turpitude, or exactly the opposite of honesty, involving
intentional disregard of law from improper motives, or an act done with an intent to give
some advantage inconsistent with official duty and the rights of others. (Teamsters
Local Union #11 Affiliated with International Brotherhood of Teamsters, etc. v Abad
(1975) 135 NJ Super 552, revd on other grounds 144 NJ Super 239 [arbitration award
vacated under "corruption" prong of statute, where employer consciously withheld
employee's production records from arbitration over propriety of employee's
discharge]).
The court added that since another provision of the statute allowed for vacating an
award in the event of "corruption in the arbitrators," the corruption mentioned in the
first provision must have referred to corruption on the part of one of the parties to the
arbitration procedure.
It is important to note that both Pour le Bebe and Bonar involved commercial actors
who stood at arm's length from their opponents and who were not subject to an over-
arching contractual duty to provide a fair arbitration to the opposing party.6 Pour le
Bebe involved a licensing dispute between two major corporations where one
corporation sought to vacate an adverse arbitration award on the grounds that counsel
for the other corporation had a conflict in representing the first corporation; Bonar
involved a dispute between a securities broker (Dean Witter) and investors in which
the broker sought to vacate an adverse award on the grounds that an expert witness
for the investors committed perjury. Under these circumstances, petitioners conceded,
the three-part federal vacatur test well may be appropriate.
Petitioners submit that, where, as here, one party owes fiduciary duties to the other,
where the fiduciary relationship is on-going at the time of arbitration, and where the
fiduciary also owes a contractual duty to provide a fair arbitration, that party should not
be permitted to obtain an award through fraud even if a skeptical opponent dealing at
arm's length might have rooted out the fraud during arbitration. The Court of Appeal
rejected this argument.
Although the Court of Appeal acknowledged that "a fiduciary relationship exists
between Rushford and his treating physicians in the context of his medical treatment,"
the court held that Petitioners nonetheless labored under a duty to investigate Kaiser's
representations as to treatment on the reasoning that, "once appellants filed their
medical malpractice claim, the parties dealt at arm's length with each other in the
arbitration proceedings. (See In re Marriage of Heggie (2002) 99 Cal.App.4th 28, 35)."
Petitioners submit that the Court's reasoning was wrong.
(a) A Physician Fiduciary Owes Particularly High Standards of Disclosure to His
Patients and the Patient Has No Duty to Investigate the Physician's Representations
As the Court of Appeal recognized, physicians stand in a fiduciary relationship with
their patients. (See, e.g., Stafford v. Shultz, (1954) 42 Cal. 2d 767, 775-779
[amputation case].) The relationship of patient and physician "is a fiduciary one of the
highest degree. It involves every element of trust, confidence and good faith." Lockett
v. Goodill (1967) 71 Wash.2d 654, 656; see also Lownsbury v. VanBuren (2002) 94
Ohio St. 3d 231, 235 ("The physician-patient relationship is a fiduciary one based on
trust and confidence and obligating the physician to exercise good faith."). The courts
recognize the unique vulnerability of a patient in medical treatment. (Cobbs v. Grant
(1972) 8 Cal.3d 229 [patients "abjectly dependent" on his doctor for information
required to make informed medical decision].)
The physician's fiduciary duties include following:
the duty of confidentiality (Business & Professions Code § 2263),
the duty of loyalty (State ex rel. McCloud v. Seier (Mo. 1978) 567 S.W.2d 127, 128;
Wargo v. Buck (1997) 123 Ohio App. 3d 110, 122), and, most important in the context
of this case,
the duty of disclosure (Moore v. Regents of University of California (1990) 51 Cal.3d
120, 131; Arato v. Avedon (1993) 5 Cal.4th 1172,1188; Pashley v. Pacific Elec. Co.
(1944) 25 Cal.2d 226, 235).
With respect to the duty of disclosure, in Garlock v. Cole (1962) 199 Cal. App. 2d 11,
16-17, the court held that a doctor owes a fiduciary duty to not misrepresent the
patient's medical condition, and the failure of a physician to disclose the true medical
facts would constitute the "most palpable fraud." The court stated that where there is
an ongoing treating relationship after malpractice is committed, the patient is entitled to
rely on the representations of his treating physicians and there is no duty for the
patient to investigate the truth of his doctor's representations. (Id at 16-17.) The
Garlock court stated: "[I]t is recognized that in cases involving such a relationship facts
which would ordinarily require investigation may not excite suspicion, and that the
same degree of diligence is not required." (Id., at 16-17 [citation omitted]). In Stafford
v. Shultz, supra, 42 Cal. 2d 767, 775-779, a case where the patient's leg was
amputated by doctors who made misrepresentations concerning the patient's medical
condition and failed to disclose the doctor's failure to perform diagnostic procedures
before misrepresenting that the mode of treatment would be effective, this Court held
that treating doctors have a fiduciary duty to fully disclose to the patient the true
medical facts regarding his medical condition and physical injuries.
Similarly, in Bowman v. McPheeters (1947) 77 Cal. App. 2d 795, 800-801, the court
ruled that a physician is prohibited from misrepresenting the nature and extent of a
patient's medical condition or injury and lulling the patient into ignorant security. This is
because as "fiduciaries it was the duty" of the physicians to "make a full and fair
disclosure" to the patient of "all facts which materially affected his rights and interests".
In Nelson v. Gaunt, (1981) 125 Cal. App. 3d 623, the court held that the patient had
the right to maintain both an action for fraud as well as malpractice against the
physician who made false and misleading statements to the patient and concealed
material information relevant to the patient's medical condition and medical treatment.
As one authority on the law of fiduciary duty has noted, once it arises, the duty of
disclosure must be discharged. R. Chalos, The Law of Fiduciary Duties (2000), § 3:41.
The duty of disclosure is unlike the other duties that make up the fiduciary bundle in
that it cannot be modified in the same way as the others. The other duties may be
modified either by agreement in advance or by agreement after the fact, or by court
order. They may be waived. But while the duty of disclosure may be modified
prospectively by legislation . . . it is not amenable to voluntary modification by the
parties. Instead, it must be discharged before any cestui can waive it and before a
court can declare it discharged.
(Id., emphasis added).
(b) The Institution of Litigation Does Not Convert an On-Going Fiduciary Relationship
into One at Arm's Length
The Court of Appeal held that "once appellants filed their medical malpractice claim,
the parties dealt at arm's length with each other in the arbitration proceedings." (Order
at 20.) The Court cited only In re Marriage of Heggie (2002) 99 Cal.App.4th 28, 35 in
support of this proposition. In re Marriage of Heggie has no application to this case
whatsoever. It involved a dissolution proceeding between a husband and wife, and
accordingly, a fiduciary relationship that was in the process of being terminated. Here,
by contrast, the fiduciary relationship was on-going and Petitioners were as "abjectly
dependent" on Kaiser's disclosure of medical judgments, representations and opinions
as they always had been.
There is no authority for the proposition that a physician in an on-going relationship
with his patient can absolve himself of all of his fiduciary obligations, particularly the
central obligation of disclosure, and act in his own interest merely upon institution of
adverse proceedings against him. Indeed, what little authority there is on the topic of a
fiduciary's duties in the context of adversarial proceedings brought by a beneficiary is
against the position taken by the Court of Appeal. For instance, in Sapp v. Superior
Court of State, in and for Los Angeles County (1953) 119 Cal.App.2d 645, a
dissolution case, the Court held that even though the husband/wife relationship
terminates as a matrimonial one, the spouse who manages the community assets
occupies a position of trust which is not terminated as to assets remaining in his hands.
That spouse retains his fiduciary duty to account to the other spouse for the
community property when the spouses are negotiating a property settlement (Id., 119
Cal.App.2d at p. 653). In Wells Fargo Bank v. Superior Court (Boltwood) (2000) 22 Cal.
4th 201, this Court considered the question of limits on a trustee's duty of disclosure
where attorney-client communications of the trustee are at issue. In Boltwood, a bank
trustee petitioned to settle its accounts and resign as co-trustee of a trust where the
beneficiaries had accused the bank of misconduct. The beneficiaries contended that
they were entitled to privileged communications between the bank and its attorney
retained in the matter of the petition.
The question before the Court was whether the trustee's duty to keep its beneficiaries
reasonably informed created an exception to the attorney-client privilege set forth in
the Evidence Code (section 954). This Court held that because the privileges set forth
in the Evidence Code are legislative creations which the courts have no power to
expand or admit exceptions to, the fiduciary's duty of disclosure did not require it to
reveal its own attorney-client communications which had occurred in the course of the
fiduciary's defense. (Id., 22 Cal at p. 206.) Importantly, the Court rested its conclusion
on the fact that the attorney-client privilege was a creature of statute which was not
susceptible to modification by the Court. The Court explicitly noted that "[i]n most of the
other jurisdictions in which this question has arisen, courts have given the trustee's
reporting duties precedence over the attorney-client privilege. . . . But those courts
consider themselves free, in a way we do not, to create exceptions to the privilege."
(Id., 22 Cal at p. 208.) "What courts in other jurisdictions give as common law privileges
they may take away as exceptions. We, in contrast, do not enjoy the freedom to restrict
California's statutory attorney-client privilege based on notions of policy or ad hoc
justification." (Id., 22 Cal at p. 209.)
Petitioners submit that, where as here, no statutory provision supervenes over the
fiduciary duty to disclose, the fiduciary remains bound by his duties even in the context
of adverse litigation. The rationale for the fiduciary exception to the extrinsic fraud rule
is that where a duty is owed to the other party and is breached during litigation, the
policy of allowing a defrauded party to seek relief outweighs the policy in favor of
finality of judgments. This is because the confidential relationship gives rise to a
fiduciary duty that must be honored even during an adversarial litigation between the
fiduciary and the party to whom the duty is owed. In such an instance, the fiduciary
owes the other party a duty of honesty and full disclosure of all material facts. (In re
Marriage of Modnick (1983) 33 Cal. 3d 897, 904-905 [husband testified falsely at trial
and failed to disclose assets and judgment was set aside as the wife was deprived of
the ability to fully present her case].)
An additional reason for refusing to relax fiduciary standards exists in this case and
every case where an HMO controls the arbitration process used by its patients: Kaiser
owed an independent, contractual duty to provide a fair arbitration to Mr. Rushford.
In Engalla v. Permanente Medical Group, Inc., et. al. (1997) 15 Cal. 4th 951; 980- 989,
this Court held that Kaiser owes its members contractual obligations to conduct a fair
arbitration and may not engage in fraudulent conduct intrinsic to an arbitration. This
Court in Engalla harshly criticized Kaiser's system, noting the wide "gap between its
contractual representations and the actual workings of its arbitration program". (Id., at
986-987.) Justice Kennard's concurring opinion states that it is the essential role of the
courts to determine whether a medical malpractice patient has received a fair
arbitration, and where unfair conduct procures Kaiser a favorable award, then it is the
duty of the trial court to vacate the award. (Id, 988-989.) Citing Section 1286.2, Justice
Kennard further stated that where there is unfair procedural or substantive conduct
during a private arbitration that "affects the arbitration award, it may form the basis for
vacating the award as one 'procured by corruption, fraud or other undue means." (Id.,
988-989 [emphasis added].)
Kaiser's Blue Ribbon Advisory Panel formed in response to this Court's criticism in
Engalla of Kaiser's arbitration system, concludes under the Section "Arbitration and the
Duty of Kaiser Permanente": "Imposing a mandatory arbitration system means that
Kaiser Permanente is implicitly representing to its members that the system is fair,
reasonable and just. We strongly believe Kaiser Permanente must honor this
representation." The duties outlined by the panel include a "duty to guarantee…
essential fairness." Contractual arbitrations must operate with a minimum level of
integrity -- otherwise arbitration would cease to qualify as an adequate mechanism to
secure individual redress for damages. Hines v. Anchor Motor Freight, Inc. (1976) 424
U.S. 554, 568 [finality clause of arbitration contract was unenforceable and arbitration
decision was set aside due to union's breach of duty to its member during the
arbitration]. An award procured by false testimony must be vacated where a participant
breaches a contractual duty owed the other party. (Hines. supra, 424 U.S. at 568-571).
Accordingly, Kaiser's fraud during its contractually-imposed arbitration process
deprives it of arm's length status.
IV. CONCLUSION
This case presents an important issue of first impression going to the heart of the
fairness and integrity of mandatory arbitration schemes in medical malpractice cases.
Review is necessary in order to settle the question of the standard for vacatur of
medical malpractice arbitration awards procured by fraud where the treating
relationship is ongoing and the physician has a contractual obligation to provide a fair
arbitration. Petitioners submit that the appropriate standard in these cases is one of a
simple showing that fraud had been committed, rather than satisfaction of any
heightened vacatur standard. Accordingly, the Petition for Review should be granted.
DATED: May 31, 2005
Respectfully submitted,
Sharonrose Cannistraci, Esq.
Mary McNamara, Esq.
Attorneys for Petitioners
TABLE OF AUTHORITIES
CALIFORNIA STATE CASES
Arato v. Avedon (1993) 5 Cal.4th 1172, 1188 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .24
Bowman v. McPheeters (1947) 77 Cal. App. 2d 795, 800-801. . . . . . . . . . . . . . . . . . . .
. . . . . . . . .25
Cobbs v. Grant (1972) 8 Cal.3d 229 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .24
Coon v. Nicola (1993) 17 Cal.App.4th 1225 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,
n.5
Engalla v. Permanente Medical Group, Inc., et. al. (1997) 15 Cal. 4th 951; 980-989 . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .30, 31
Estate of Anderson (1983) 149 Cal. App. 3d 336 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . 17
Estate of Sanders (1985) 40 Cal. 3d 607 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 18
Garlock v. Cole (1962) 199 Cal. App. 2d 11, 16-17 . . . . . . . . . . . . . . . . . . . . . . . . . . .
24, 25
In re Marriage of Heggie (2002) 99 Cal. App. 4th 28, 35 . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 23, 27
In re Marriage of Modnick (1983) 33 Cal. 3d 897, 904-905 . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 29
Lamb v. Holy Cross Hospital (1978) 83 Cal. App. 3d 1007 . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 13
Mansdorf v. California Physicians' Service, Inc. (1978) 87 Cal. App. 3d 412 . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Moore v. Regents of University of California (1990) 51 Cal. 3d 120, 131 . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . 24
Nelson v. Gaunt (1981) 125 Cal. App. 3d 623 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 26
Pacific Crown Distributors v. Brotherhood of Teamsters and Auto Truck Drivers, Local
70 (1986)183 Cal.App.3d 1138 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15-16
Pashley v. Pacific Elec. Co. (1944) 25 Cal.2d 226, 235 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 24
Pico v. Cohn (1891) 91 Cal. 129 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12-
13
Pour Le Bebe, Inc. v. Guess? Inc (2003) 112 Cal.App.4th 810. . . . . . . . . . . . . . . . . . . .
. . . 9, 14-15, 19-20, 22
Rios v. Allstate Ins. Co. (1977) 68 Cal. App. 3d 811 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 13
Rosenfeld v. Superior Court (1983) 143 Cal.App.3d 198 . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 21, n.5
Sapp v. Superior Court of State, in and for Los Angeles County (1953) 119 Cal. App.
2d 645, 653 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Stafford v. Shultz (1954) 42 Cal. 2d 767, 775-779 . . . . . . . . . . . . . . . . . . . . . . . . . . .
23-24, 25
Wells Fargo Bank v. Superior Court (Boltwood) (2000) 22 Cal.4th 201, 206, 208, 209 .
. . . . . . . . . . . . . . . . . . . . . . . . 28, 29
OTHER STATE CASES
Kloss v. Edward D. Jones & Co. (2002) 310 Mont. 123 . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 22, n. 6
Lockett v. Goodill (1967) 71 Wash.2d 654, 656 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 24
Lownsbury v. VanBuren (2002) 94 Ohio St.3d 231, 235 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .24
Meinhard v. Salmon (1928) 249 NY 458 . . . . . . . . . . . . . . . . . . . . . . . 18-19
State ex rel. McCloud v. Seier (Mo. 1978) 567 S.W.2d 127, 128 . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . 24
Teamsters Local Union #11 Affiliated with International Brotherhood of Teamsters, etc.
v Abad (1975) 135 NJ Super 552 revd on other grounds 144 NJ Super 239 . . . . . . . . .
. . . . . . . . . . . . . . . . 21
Wargo v. Buck (1997) 123 Ohio App.3d 110, 122 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 24
FEDERAL CASES
Bonar v. Dean Witter Reynolds, Inc. (11th Cir. 1988) 835 F.2d 1378 . . . . . . . . . . . . . . .
. . . . . . . . 15, n.4, 19-20
Dogherra v. Safeway Stores, Inc. (9th Cir. 1982) 679 F.2d 1293 cert denied 459 U.S.
990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, n.4
Hines v. Anchor Motor Freight, Inc. (1976) 424 U.S. 554, 568, 568-571 . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .31
Intern. Broth. Teamsters, Local 519 v. U.P.S. (6th Cir. 2003) 335 F.3d 497 . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 15, n.4
Newark Stereotypers' U. No. 18 v. Newark Morning Ledger Co. (3d Cir. 1968) 397 F.2d
594 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, n.4
OTHER AUTHORITIES
8 Witkin, Cal. Procedure (4th ed. 1997) Attack on Judgment in Trial Court, § 223 . . . . .
. . . . . . . . 11
11 C. Wright & A. Miller Federal Practice and Procedure p. 2868 (1973) . . . . . . . . . . . .
. . . . . . . . 12
22 A.L.R. 4th 366 (1983, updated December 2003) What Constitutes Corruption,
Fraud, or Undue Means in Obtaining Arbitration Award Justifying Avoidance of Award
Under State Law . . . . . . . . . . . . . . . . . . . . . . . . 14, n.3
Business & Professions Code § 2263 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
California Code of Civil Procedure § 1286.2(a)(1) and § 1287 . . . . passim
Fed.R.Civ.P 60(b)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Freeman, Judgments (5th ed. 1925), Section 1235, p. 2576 . . . . . . . . . . . . . . . . . . . . .
. . . . . . . 17
Ian R. MacNeil, American Arbitration Law (1992) 15- 25 . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . 22, n.6
Jerold S. Auerbach, Justice Without Law? (1983) 101-114 . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 22, n.6
Margaret M. Harding, The Redefinition of Arbitration by Those with Superior Bargaining
Power
1999 UTAH L. REV. 857 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, n.6
R. Chalos, The Law of Fiduciary Duties (2000) § 3:41 . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . 26
Rest.2d, Judgments §70 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Footnotes
1 The facts of the course of treatment are set forth more fully in the Court of Appeal's
Order at pages 2-4.
2 All further unspecified statutory references are to the Code of Civil Procedure.
3 Other states have long held that false testimony and intrinsic fraud constitute
grounds for vacating an arbitration award. (See 22 A.L.R. 4th 366 (1983, updated
December 2003), entitled "What Constitutes Corruption, Fraud, or Undue Means in
Obtaining Arbitration Award Justifying Avoidance of Award Under State Law.)
4 Among others, the court cited to Intern. Broth. Teamsters, Local 519 v. U.P.S. (6th
Cir. 2003) 335 F.3d 497 [false testimony grounds for vacating an award]; Newark
Stereotypers' U. No. 18 v. Newark Morning Ledger Co. (3d Cir. 1968) 397 F.2d 594,
598 ["We may assume that the obtaining of an award by perjured testimony would
constitute fraud under [9 U.S.C.] § 10(a)]; Dogherra v. Safeway Stores, Inc. (9th Cir.
1982) 679 F.2d 1293, 1297; cert denied 459 U.S. 990 ["Obtaining an [arbitration]
award by perjured testimony constitutes fraud" and grounds for vacating the award];
Bonar v. Dean Witter Reynolds, Inc. (11th Cir. 1988) 835 F.2d 1378 [award vacated in
part to delete damages testified to by expert witness who gave false testimony in
stating credentials].
5 Section 1295 of Title 9.1 was adopted in 1975 to alleviate the escalating costs of
medical malpractice insurance premiums (and resulting problems of health care
availability) due to the surge of medical malpractice actions and high jury awards.
(Rosenfeld v. Superior Court (1983) 143 Cal.App.3d 198). Its basic function was to
establish uniform language and mandate the conspicuous appearance of arbitration
clauses in medical services contracts. The result is to bind patients to arbitration
contracts that could otherwise be challenged as adhesion contracts. (Coon v. Nicola
(1993) 17 Cal.App.4th 1225.)
6 Historically, arbitration was designed as a method of alternative dispute resolution
between merchants of equal sophistication and bargaining power. (See, e.g., Kloss v.
Edward D. Jones & Co. (2002) 310 Mont. 123, 142 n. 3 (Nelson, J., concurring); see
also Jerold S. Auerbach, Justice Without Law? 101-114 (1983); Ian R. MacNeil,
American Arbitration Law 15- 25 (1992); Margaret M. Harding, The Redefinition of
Arbitration by Those with Superior Bargaining Power, 1999 UTAH L. REV. 857, 857
(1999).) dy>
Supreme Court
RUSHFORD v. KAISER FOUNDATION HOSPITALS
Case Number S134302
Date Description
07/13/2005 Petition for review denied
RUSHFORD v. KAISER FOUNDATION HOSPITALS
Case Number S134302
Date Description
07/13/2005 Petition for review denied
May 09, 2014
Job Posting: Kaiser
Permanente San Diego
KP is hiring a full-time Health
Care Ombuds/Mediator in
San
Diego, California. The
Kaiser HCOM, "functions as
a trained alternative dispute
professional offering
patients, family members,
staff & providers a conflict
management program to
resolve patient/provider
healthcare disputes early
thereby improving patient
safety & reducing the costs
of health care dispute
resolution."
Although these jobs have
traditionally gone to
individuals with extensive
clinical or health care
management experience,
that seems to be changing
and Kaiser is hiring more
ADR professionals. No
salary or closing date
indicated. (Kaiser
Permanente Careers, Job
ID: 246758.)
April 29, 2011
Interview With Kaiser
Permanente Health Care
Ombuds
The Marquette University
Law School Faculty Blog
features an interview with
David Richardson, PhD.
Richardson introduces
himself and gives an
overview of his the role of
the Ombuds within the
sprawling Kaiser
Permanente health care
system. (Kaiser employs 28
HCOMs in California across
35 locations.) "The primary
focus when the Ombudsman
is involved is to achieve a
resolution concerning
patient-clinician issues at
the earliest possible
opportunity and lowest
possible level, well before
they are elevated to a legal
claim," he said.
Before joining Kaiser as an
Ombudsman, Richardson
worked at The Charles R.
Drew University of Medicine
and Science in Los Angeles
as the Center Administrator
for Behavioral Neuroscience
Research Center and later
as the Administrative
Director for the College of
Medicine. He earned his
doctorate in Psychology and
completed mediation training
at the School of Law at
Loyola Marymount
University. He points out that
he presently is the the only
Certified Organizational
Ombudsman Practitioner at
Kaiser. The interview was
conducted by Mathew
Pauley, the Medical
Bioethics Director at Kaiser's
Fontana and Ontario
Vineyard Medical Centers,
and a Marquette Law School
alumnus. (Marquette
University Law School
Faculty Blog.)
Job Posting: Kaiser
Permanente San Diego
KP is hiring a full-time Health
Care Ombuds/Mediator in
San
Diego, California. The
Kaiser HCOM, "functions as
a trained alternative dispute
professional offering
patients, family members,
staff & providers a conflict
management program to
resolve patient/provider
healthcare disputes early
thereby improving patient
safety & reducing the costs
of health care dispute
resolution."
Although these jobs have
traditionally gone to
individuals with extensive
clinical or health care
management experience,
that seems to be changing
and Kaiser is hiring more
ADR professionals. No
salary or closing date
indicated. (Kaiser
Permanente Careers, Job
ID: 246758.)
April 29, 2011
Interview With Kaiser
Permanente Health Care
Ombuds
The Marquette University
Law School Faculty Blog
features an interview with
David Richardson, PhD.
Richardson introduces
himself and gives an
overview of his the role of
the Ombuds within the
sprawling Kaiser
Permanente health care
system. (Kaiser employs 28
HCOMs in California across
35 locations.) "The primary
focus when the Ombudsman
is involved is to achieve a
resolution concerning
patient-clinician issues at
the earliest possible
opportunity and lowest
possible level, well before
they are elevated to a legal
claim," he said.
Before joining Kaiser as an
Ombudsman, Richardson
worked at The Charles R.
Drew University of Medicine
and Science in Los Angeles
as the Center Administrator
for Behavioral Neuroscience
Research Center and later
as the Administrative
Director for the College of
Medicine. He earned his
doctorate in Psychology and
completed mediation training
at the School of Law at
Loyola Marymount
University. He points out that
he presently is the the only
Certified Organizational
Ombudsman Practitioner at
Kaiser. The interview was
conducted by Mathew
Pauley, the Medical
Bioethics Director at Kaiser's
Fontana and Ontario
Vineyard Medical Centers,
and a Marquette Law School
alumnus. (Marquette
University Law School
Faculty Blog.)
| San Diego Education Report |
| SDER |
San Diego
Education Report
Education Report
| SDER |
| SDER |
| SDER |