King v. Bryant

• Citation: 763 S.E.2d 338 (Table)
• Decision Date: 15 July 2014
• Docket Number: No. COA13–1003.,COA13–1003.
• Court: Court of Appeal of North Carolina (US)
• Parties: Robert E. KING and wife, Jo Ann O'Neal, Plaintiffs, v. Michael S. BRYANT, M.D., and Village Surgical Associates, P.A., Defendants.

763 S.E.2d 338 (Table)

Robert E. KING and wife, Jo Ann O'Neal, Plaintiffs

v.Michael S. BRYANT, M.D., and Village Surgical Associates, P.A., Defendants.

No. COA13–1003.

Court of Appeals of North Carolina.

July 15, 2014.

Beaver, Holt, Sternlicht & Courie, P.A., by Mark A. Sternlicht, for Plaintiffs.

Walker, Allen, Grice, Ammons & Foy, L.L.P., by O. Drew Grice, Jr., for Defendants.

STEPHENS, Judge.

I. Factual Context and Procedural Posture

This case arises from a medical malpractice action filed by Plaintiffs Robert E. King and Jo Ann O'Neal on 28 September 2011 in Cumberland County Superior Court. Therein, Plaintiffs allege that Defendant Michael S. Bryant negligently performed a laparoscopic bilateral inguinal hernia repair on King on 14 May 2009. On 4 November 2011, Defendants submitted a motion to stay proceedings in superior court and to enforce an agreement to alternative dispute resolution (“the arbitration agreement”) between the parties. Plaintiffs moved the court to deny that motion on 16 November 2011, asserting that the arbitration agreement is not enforceable.

In pertinent part, the arbitration agreement provides as follows:

Village Surgical Associates, PA

Agreement to Alternative Dispute Resolution

In accordance with the terms of the Federal Arbitration Act, 9 USC 1 –16, I agree that any dispute arising out of or related to the provision of healthcare services by me, by Village Surgical Associates, PA, or its employees, physician members and agents, shall be subject to final and binding resolution through private arbitration.

The parties to this Agreement shall agree upon three Arbitrators and at least one arbitrator of the three shall be a physician licensed to practice medicine and shall be board certified in the same specialty as the physician party. The remaining Arbitrators either shall be licensed to practice law in NC or licensed to practice medicine in NC. The parties shall agree upon all rules that shall govern the arbitration, but may be guided by the Health Care Claim Settlement Procedures of the American Arbitration Association, a copy of which is available to me upon request. I understand that this agreement includes all health care services which previously have been or will in the future be provided to me, and that this agreement is not restricted to those health care services rendered in connection with any particular treatment, office or hospital admission. I understand that this agreement is also binding on any individual or entity and not a precondition to receiving health care services.

....

(Emphasis in original). The arbitration agreement was signed on 29 April 2009, approximately two weeks before King's surgery.

A hearing on Defendants' motion was held on 12 March 2012. The trial court issued an order that same day, denying Defendants' motion on the grounds that the arbitration agreement: (1) “leaves material portions open to future agreements by providing, inter alia,that the parties shall agree upon three arbitrators and ... agree upon all rules that shall govern the arbitration”; (2) is an “agreement to agree”; and (3) is not a binding contract. Defendants appealed the order to this Court on 10 April 2012 in King v. Bryant,–––N.C.App. ––––, ––––, 737 S.E.2d 802, 805 (2013) [hereinafter King I]. In an opinion filed 5 February 2013, this Court concluded that the arbitration agreement was not invalid for indefiniteness regarding the identity of the arbitrators or the procedures to be followed during arbitration. Id.at ––––, 737 S.E.2d at 807–08. We declined, however, to address Plaintiffs' arguments that the arbitration agreement was unconscionable and inapplicable to O'Neal and remanded the case to the trial court with instructions to address those arguments. Id.at –––, 737 S.E.2d at 808.

A new hearing was held on 21 March 2013. On 10 May 2013, the trial court entered an order again denying Defendants' motion to compel arbitration. The court concluded that the agreement was unenforceable as to King because it was a product of constructive fraud and unconscionability. As to O'Neal, the court concluded that the agreement was not enforceable because she did not sign the agreement and because she neither benefitted nor sought to benefit from the agreement. Defendants appeal.

II. Appellate Jurisdiction & Standard of Review

As we noted in King I,

North Carolina law generally permits a party to appeal only from a finaljudgment of the superior court. A final judgment is defined as one which disposes of the cause as to all the parties, leaving nothing to be judicially determined between them in the trial court. However, the [legislature] additionally permit[s] an aggrieved party in a civil proceeding to appeal from any interlocutory order or judgment of a superior or district court which affects a substantial right.

Here, the trial court's order is not a final disposition of this case; thus, it is interlocutory. However, our courts have held that the denial of a motion to compel arbitration, although interlocutory, is nevertheless immediately appealable, as it affects a substantial right. Therefore, we have jurisdiction to hear Defendants' appeal.

A trial court's determination that an action is subject to arbitration is a conclusion of law which we review de novo.Under a de novoreview, the court considers the matter anew and freely substitutes its own judgment for that of the lower tribunal.

Id.at ––––, 737 S.E.2d at 805–06 (citations, internal quotation marks, brackets, and ellipses omitted; emphasis in original). In addition, the trial court's findings of fact are conclusive on appeal when supported by competent evidence, even where the evidence might have supported findings to the contrary. See Evangelistic Outreach Ctr. v. Gen. Steel Corp.,181 N.C.App. 723, 726, 640 S.E.2d 840, 843 (2007) (affirming the trial court's denial of the defendant's motion to compel arbitration). “Conclusions of law drawn by the trial court from its findings of fact are reviewable de novo on appeal.” Carolina Power & Light Co. v. City of Asheville,358 N.C. 512, 517, 597 S.E.2d 717, 721 (2004) (citation omitted).

III. Discussion

On appeal, Defendants argue that the trial court erred by denying their motion to compel arbitration because the arbitration agreement is not a product of constructive fraud and not unconscionable. Defendants also contend that O'Neal is bound by the arbitration agreement despite being a non-signatory. We affirm the trial court's opinion on the grounds that the arbitration agreement is unconscionable. We do not address Defendants' argument as it relates to the applicability of the arbitration agreement to O'Neal.

1. Background

In King I,we declined to address the unconscionability and non-signatory issues raised by Plaintiffs because the trial court did not reach those issues in its original order. Id.at ––––, 737 S.E.2d at 808–09. Observing that “the trial court is the appropriate body to determine whether the [arbitration] agreement is unconscionable,” we remanded the case with instructions for the court to undertake “any unconscionability analysis ... with an understanding of the unique nature of the physician/patient relationship.” Id.at ––––, 737 S.E.2d at 808. We also directed the trial court to “apply North Carolina's law of unconscionability” and commented on the following “particularly important” considerations as relevant to the fiduciary nature of the parties' physician/patient relationship:

While nearly every court to consider the issue has concluded that medical malpractice claims can properly be submitted to arbitration, issues have been raised as to patients' understanding of arbitration contracts and the potentially coercive circumstances under which the agreements are made. The use of arbitration clauses in contracts for healthcare services is distinct from their use in settling labor or commercial disputes because the legal relationship between provider and patient is determined by both private contract law and public tort law. There is tension between contract law, the principles of which have been applied to binding arbitration clauses in labor [ ] and commercial agreements for years[,] and the application of tort law to enforce conformity with standards of care desired by society, particularly standards of professional care.

Id.(citation omitted). In addition, we pointed out that

[the] fiduciary relationship [carries] an [inherent] affirmative duty to disclose all facts material to a transaction.

Under North Carolina law, fiduciary relationships create a rebuttable presumption that the plaintiff put his trust and confidence in the defendant as a matter of law. Once [the] presumptive fiduciary relationship is alleged, it is the defendantwho bears the burden of showing he or she acted openly, fairly [,] and honestly in bringing about the transaction. This means that the defendant must prove, by the greater weight of the evidence, that, with regard to the transaction, the defendant made a full, open disclosure of material facts, that hedealt with the plaintiff fairly, without oppression, imposition or fraud, and that heacted honestly.

Id.at ––––, 737 S.E.2d at 809 (citations, internal quotation marks, and brackets omitted; emphasis in original). Lastly, we observed that the “North Carolina Constitution provides a ‘sacred and inviolable’ right to a jury trial in all controversies at law respecting property” and any agreement waiving that right “must be examined cautiously, especially in situations in which a fiduciary relationship is present, as ... here.” Id.at ––––, 737 S.E.2d at 809 (brackets and certain quotation marks omitted).

“[H]eeding the guidance of the Court of Appeals,” the trial court made the following relevant findings of fact and conclusions of law on remand:

FINDINGS OF FACT

....

2. ... King, now 68, has no educational degree beyond high school and his job requires little reading. He has minimal experience reading legal documents.

3. Defendant[s] ... [have] experience in...