BE CAREFUL WHAT YOU DON'T ASK FOR; HOSPITAL UNABLE TO APPEAL BIG ARBITRATION AWARD IN MEDICAL STAFF DISPUTE

Posted by Marcia Augsburger on May 04, 2011

Streeter Seidell, Comedianphoto © 2005 Zach Klein | more info (via: Wylio)

We have reported before on the fact that health care entities should consider including appellate rights in their arbitration award.  On April 27, 2011, a California Appellate court issued a new opinion concerning appeals of arbitration awards.  The decision, which affirmed a large arbitration award against a hospital in a medical staff dispute, is important to everyone involved in arbitration, and specifically to hospitals, physicians, and medical staffs.   Take note: the court affirmed the award of punitive damages against the hospital!

In Shahinian v. Cedars-Sinai Medical Center, 2011 WL 1566971, the court upheld an arbitration award in favor of Dr. Shahinian, a physician then on the medical staff at Cedars-Sinai Medical Center, to the tune of $508,124 in economic damages, $1,603,650 in emotional distress damages, and $2,580,000 in punitive damages.  The alleged wrongdoing included Cedars-Sinai's placing such conditions on Dr. Shahinian's clinical privileges as to interfere with his contractual relationships with scheduled patients, retaliating against him for voicing concerns about the clean and sanitary conditions of surgical instruments and taking his clinical privileges, and discriminatorily permitting other physicians to use instruments without the limiting conditions the hospital imposed on him.

Cedars-Sinai appealed on the grounds that the award violated public policy and therefore exceeded the arbitrator's powers.  The appellate court disagreed.  The arbitration arose under a written contract that settled a prior dispute between the parties. In the settlement, Cedars-Sinai agreed, among other things, not to "retaliate or discriminate against Dr. Shahinian in any unlawful manner with respect to his continued status as a medical staff member, including matters concerning his medical staff privileges" and that although Shahinian's medical staff privileges were governed exclusively by the Medical Staff Bylaws and Departmental procedures, issues regarding Dr. Shahinian's current medical staff privileges would be handled in a non-discriminatory manner on the same terms and conditions as other medical staff members. 

Find out how the court ruled after the break.

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Does Your Arbitration Clause Give You Meaningful Appeal Rights in California?

Posted by John Barnes on April 09, 2011

Gavel & Strykerphoto © 2008 KeithBurtis | more info (via: Wylio)

Contributed by John Barnes as part of our ongoing Arbitration Matters series.

Many contracts in the health care industry contain arbitration clauses.  When done right, arbitration can be a cost-effective alternative to the court system.  But what happens if the arbitrator fails to follow the law?  Do you have any recourse?  In California, the answer is: it depends on if your arbitration clause allows for reviews of errors of law.

The California Arbitration Act (Civil Code 1280, et seq.) provides only limited bases for review.  Section 1286.2 provides that an arbitration award may be invalidated only when (1) it was procured by corruption, fraud, or other undue means; (2) there was evidence of bias or corruption by the arbitrator; (3) the arbitrator exceeded his or her powers; or (4) the arbitrator was guilty of misconduct that violated a party's due process rights.  Until recently, courts construing these provisions generally refused to overturn awards unless they were "completely irrational" or "so bizarre as to be completely irrational."  In short, if the arbitrator in your case failed to follow the law, your chances of overturning the award, even if the arbitrator got it completely wrong, were practically nil.

But the California Supreme Court has opened the door to allowing review of arbitration awards under certain circumstances.  In Cable Connection, Inc. v. Direct TV, Inc., the Court recognized that parties can alter the usual scope of review by expressly agreeing to expand the scope of review.  Specifically, the Court ruled that parties to an arbitration agreement can agree that an arbitrator is not permitted to make legal errors, and that such errors can be reviewed by a court.

This ruling has significant implications for parties in the health care field who want to preserve the right to appeal alleged errors of law to the courts.  The substance of an arbitration clause can make or break a party's ability to appeal an arbitration award to the courts.