Nielsen v. Barnett

• Decision Date: 16 June 1992
• Docket Number: N,No. 3,Docket Nos. 88642,88685,3
• Citation: 485 N.W.2d 666,440 Mich. 1
• Parties: Nancy J. NIELSEN & Phillip Nielsen, Plaintiffs-Appellees, v. Dr. BARNETT, Defendant-Appellant, and Butterworth Hospital, a corporation & Dr. Hoag, Defendants. Nancy J. NIELSEN & Phillip Nielsen, Plaintiffs-Appellees, v. BUTTERWORTH HOSPITAL, a corporation & Dr. Hoag, Defendants-Appellants. Calendarovember Term 1991.
• Court: Michigan Supreme Court

Page 666

485 N.W.2d 666

440 Mich. 1

Nancy J. NIELSEN & Phillip Nielsen, Plaintiffs-Appellees, v. Dr. BARNETT, Defendant-Appellant, and Butterworth Hospital, a corporation & Dr. Hoag, Defendants.

Nancy J. NIELSEN & Phillip Nielsen, Plaintiffs-Appellees, v. BUTTERWORTH HOSPITAL, a corporation & Dr. Hoag, Defendants-Appellants.

Docket Nos. 88642, 88685.

Calendar No. 3, November Term 1991.

Supreme Court of Michigan.

Argued Nov. 5, 1991.

Decided June 16, 1992.

Lopatin, Miller, Freedman, Bluestone, Erlich, Rosen and Bartnick by Richard E. Shaw, Detroit, for plaintiffs-appellees.

Farr & Oosterhouse, Joel E. Krissoff, Steven L. Skahn, Grand Rapids, for defendant-appellant.

Gruel, Mills, Nims & Pylman, Norman H. Pylman, Thomas R. Behm, Grand Rapids, for Butterworth and Dr. Hoag.

BRICKLEY, Justice.

We are asked to determine whether the arbitration panel below erred by denying the plaintiffs' claim because it was barred by the statute of limitations governing malpractice claims. ¹ We hold that the arbitrators did not exceed their authority in finding that the plaintiffs' claim was untimely.

I FACTUAL BACKGROUND

Plaintiff Nancy J. Nielsen was admitted to defendant Butterworth Hospital on August 1, 1982, underwent an abdominal hysterectomy on August 4, and was released from the hospital on August 10. Plaintiff signed an agreement, dated August 1, 1982, to arbitrate any claims or disputes that arose out of or in connection with the health care rendered during her hospital stay. Upon her release from the hospital, plaintiff was aware of the symptoms upon which she bases her medical malpractice claim.

On June 22, 1984--twenty-two months and twelve days after plaintiff was released from the hospital--plaintiffs filed suit in Kent Circuit Court, alleging medical malpractice by defendants Butterworth Hospital, and Drs. Hoag and Barnett. Defendants brought a motion to dismiss and to compel arbitration pursuant to the arbitration agreement. The circuit judge heard oral argument on December 7, 1984, and, ruling from the bench, granted defendants' motion. An order was entered by the Kent Circuit Court on December 27, 1984.

Plaintiffs filed their demand for arbitration on or about April 16, 1986--nearly sixteen months after the circuit court's order dismissing and compelling arbitration, and over three and one-half years after plaintiff was released from the hospital. In response to plaintiffs' demand for arbitration, defendants filed in the arbitration proceedings a motion to dismiss plaintiffs' claim as untimely, pursuant to the two-year statute of limitations applicable to malpractice claims. M.C.L. Sec. 600.5805(4); M.S.A. Sec. 27A.5805(4). The arbitration panel found that the plaintiffs' claim was barred by the statute of limitations on the basis of its theory that the plaintiffs' circuit court suit did not toll the statute.

On September 30, 1987, plaintiffs filed a complaint in Kent Circuit Court, seeking to vacate the arbitration award. Plaintiffs subsequently moved for summary vacation of the award, and defendants countermoved for confirmation. The circuit court held that "[w]hether the timeliness of arbitration is controlled by statute of limitations, waiver, or laches, or all three, a delay which exceeds the statute of limitations applicable to the underlying claim, even when tolled by the lawsuit, is too long." The court therefore granted defendants' motion to confirm the award, denied plaintiffs' motion to vacate the award, and dismissed plaintiffs' cause of action.

Plaintiffs appealed, and the Court of Appeals reversed, holding that the arbitration panel erred by applying the two-year statute of limitations directly to bar the plaintiffs' claim in the arbitration proceeding, rather than applying the statute of limitations by analogy. The Court held that, but for this clear error of law, the arbitration panel's decision would have been different. 182 Mich.App. 507, 452 N.W.2d 848 (1990).

We granted defendants' application for leave to appeal, 437 Mich. 1000 (1991), and now conclude that the Court of Appeals erroneously reversed the decision of the trial court.

II

It is undisputed that the arbitration agreement signed by the parties does not explicitly subject the plaintiffs' claim to a period of limitation. The agreement provides that "any arbitration will be conducted in accordance with Michigan Law and the Michigan Medical Arbitration Rules, as approved by the Commissioner of Insurance." The parties' arbitration agreement is governed by the Malpractice Arbitration Act (MAA), M.C.L. Sec. 600.5040 et seq.; M.S.A. Sec. 27A.5040 et seq., which applies to

"the arbitration of a dispute, controversy, or issue arising out of or resulting from injury to, or the death of, a person caused by an error, omission, or negligence in the performance of professional services by a health care provider, hospital, or their agent, or based on a claimed performance of such services without consent, in breach of warranty, or in violation of contract." M.C.L. Sec. 600.5040(1); M.S.A. Sec. 27A.5040(1).

The various sections of the MAA provide for, inter alia: the form of an arbitration agreement, M.C.L. Secs. 600.5041-600.5042; M.S.A. Secs. 27A.5041-27A.5042; representation by counsel and the standard of care, M.C.L. Sec. 600.5043; M.S.A. Sec. 27A.5043; the composition and selection of the arbitration panel, M.C.L. Sec. 600.5044; M.S.A. Sec. 27A.5044; demands for arbitration, M.C.L. Sec. 600.5046(1); M.S.A. Sec. 27A.5046(1); offers of reparation,%2990,0000,440 Mich. [PG6] M.C.L. Sec. 600.5047; M.S.A. Sec. 27A.5047; discovery, M.C.L. Sec. 600.5048; M.S.A. Sec. 27A.5048; the conduct of an arbitration hearing, M.C.L. Sec. 600.5050; M.S.A. Sec. 27A.5050; and the relief available, M.C.L. Sec. 600.5054(1); M.S.A. Sec. 27A.5054(1). The MAA does not include a provision specifying a period of limitation for medical malpractice claims brought before an arbitration panel.

Although the Michigan Medical Arbitration Rules now provide that the same period of limitation applies whether a malpractice claim is brought in court or before an arbitration panel, ² at the time plaintiffs demanded arbitration the rules did not specifically provide for a period of limitation. The statute of limitations that now clearly governs malpractice claims in arbitration defines when a claim based on malpractice accrues and, by incorporating other sections of the RJA, ³ it also defines when an action must be commenced. M.C.L. Sec. 600.5838; M.S.A. Sec. 27A.5838.

The parties dispute whether, absent an express provision in the agreement providing a period of limitation, the arbitrators could find that the plaintiffs' claim was untimely. Conceding that the arbitration agreement is silent on the issue of timeliness, the defendants argue that because the agreement directs the arbitrators to apply "Michigan Law," the panel correctly dismissed the plaintiffs' claim pursuant to the statute of limitations applicable to malpractice claims. The plaintiffs argue, however, that the statute defining the period of limitation for malpractice claims only applies to court actions. Further, the plaintiffs assert that because no statute of limitations applies to their claim, the arbitrators erred in finding that the plaintiffs' demand for arbitration was untimely.

The plaintiffs argue that the statute of limitations governing the timeliness of malpractice claims is not applicable to claims brought before an arbitration panel because that statute uses the term "action." M.C.L. Sec. 600.5805(1); M.S.A. Sec. 27A.5805(1) provides:

"A person shall not bring or maintain an action to recover damages for injuries to persons or property unless, after the claim first accrued to the plaintiff ..., the action is commenced within the periods of time prescribed by this section." (Emphasis added.)

This section further provides that "[t]he period of limitations is 2 years for an action charging malpractice." M.C.L. Sec. 600.5805(4); M.S.A. Sec. 27A.5805(4) (emphasis added). The plaintiffs argue that if the Legislature had intended this statute of limitations to apply to arbitration proceedings, as opposed to court actions, the Legislature would not have used the term "action."

We need not address the parties' arguments with regard to legislative intent. Instead, we find the facts in this case analogous to the facts supporting our decision in Gordon Sel-Way, Inc. v. Spence Bros., Inc., 438 Mich. 488, 475 N.W.2d 704 (1991). In Gordon Sel-Way, the arbitration award in favor of plaintiff Sel-Way included an amount designated as "interest." It was undisputed that the arbitration agreement between the parties did not explicitly provide for an award of interest. The circuit court modified the award by striking the amount identified as "interest," and the Court of Appeals affirmed that decision. The lower courts agreed with defendant Spence that the arbitrators exceeded the scope of their authority by making an award of interest absent express authority to do so under the terms of the arbitration contract. Id. at 494, 475 N.W.2d 704.

This Court reversed the decisions of the lower courts, finding that the absence of an interest provision in the contract was not fatal. Id. at 497-498, 475 N.W.2d 704. We noted, first, that because arbitration is a matter of contract, the arbitration agreement confers upon the arbitrators their authority to act and they are bound to act within the terms of the agreement. Id. at 496, 475 N.W.2d 704. However, we rejected the defendant's argument that an award of interest is only authorized if explicitly provided for in the agreement. We reasoned instead that the arbitrators' authority to award interest as an element of damages was derived from the broad language of the agreement giving the arbitrators the authority to resolve all claims arising out of the contract or its breach. Id. at 498, 475 N.W.2d 704. We emphasized that the common-law doctrine of awarding...