In King v. Bryant, the North Carolina Supreme Court affirmed the denial of a surgeon's motion to enforce an arbitration agreement with a patient in a medical malpractice lawsuit where the surgeon breached a fiduciary duty to the patient by failing to disclose and adequately explain the arbitration agreement, which rendered the arbitration agreement unenforceable.

Fiduciary Relationship

The Supreme Court agreed with the Court of Appeals and the trial court that a fiduciary relationship existed between the surgeon and the patient at the time the patient filled out intake forms prior to receiving medical treatment. In recognizing a fiduciary relationship, the Court focused its analysis on the "confidential relationship" that resulted from the patient sharing his sensitive medical information at the intake phase of his visit and placing trust in the physician by seeking advice and care. Of particular significance, the Court found a fiduciary relationship "independent of the existence of a physician-patient relationship."

Breach of Fiduciary Duty

The Court held that the surgeon breached his fiduciary duty to the patient by "failing to make a full disclosure of the nature and import of the arbitration agreement to him at or before the time that it was presented for his signature." Further, the surgeon gave the patient the arbitration agreement, "in a collection of documents, thereby creating the impression that the arbitration agreement was simply another routine document that [the patient] needed to sign in order to become a patient." The Court was careful to note that it was not expressing disapproval of the use of arbitration agreements between physicians and patients, but rather that it was simply requiring those agreements to be accompanied by a "proper disclosure."

Although the Court did not specify what would have been a proper disclosure it noted certain findings by the trial court that factored into its holding:

  • The arbitration agreement did not explain that it was foreclosing the patient's access to judicial process.
  • The arbitration agreement did not mention or explain that it functioned as a waiver of the patient's right to a trial by jury. It did not contain the words "jury" or "judge" or "trial."
  • The arbitration agreement did not provide that the patient could consult an attorney prior to signing.
  • The arbitration agreement did not define arbitration but referred to it continually throughout.
  • The arbitration agreement did not clearly state that the surgeon's provision of medical services was not contingent upon the patient signing the agreement.
  • The arbitration agreement was presented to the patient among a pile of medical intake documents without explanation.

Based upon the Court's ruling, any entity that relies upon arbitration agreements should review the context in which the agreements are presented and executed, and also consider more explicit disclosures regarding the impact of entering into an arbitration agreement.

Dissent

Chief Justice Martin and Associate Justice Newby each dissented separately, citing the United States Supreme Court's decision in AT&T Mobility, LLC v. Concepcion, and argued that all of the patient's state common law defenses to the arbitration agreement (including breach of fiduciary duty) were preempted by the Federal Arbitration Act. The defendants may likely seek a review of this decision by the U.S. Supreme Court relying upon the arguments outlined in the dissenting opinions.

Impact Beyond the Medical Community

This decision could have an impact on the validity of a number of agreements in a commercial setting beyond arbitration agreements in the medical community. The majority's rationale could potentially be applied to any setting where one party shares confidential or sensitive information and places trust in another party to create a fiduciary relationship. A violation of that duty could similarly be utilized as a defense to the enforcement of other agreements. This decision will also lead to more challenges to arbitration agreements based in numerous settings.

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