Siopes v. Kaiser Found. Health Plan, Inc.

• Decision Date: 26 September 2013
• Docket Number: No. SCAP–12–0000361.,SCAP–12–0000361.
• Citation: 130 Hawai'i 437,312 P.3d 869
• Parties: Michael SIOPES and Lacey Siopes, Petitioners/Plaintiffs–Appellants, v. KAISER FOUNDATION HEALTH PLAN, INC.; Hawai‘i Permanente Medical Group, Inc.; Kaiser Foundation Hospitals, Inc., Respondents/Defendants–Appellees.
• Court: Hawaii Supreme Court

130 Hawai'i 437

312 P.3d 869

Michael SIOPES and Lacey Siopes, Petitioners/Plaintiffs–Appellants,

v.KAISER FOUNDATION HEALTH PLAN, INC.; Hawai‘i Permanente Medical Group, Inc.; Kaiser Foundation Hospitals, Inc., Respondents/Defendants–Appellees.

No. SCAP–12–0000361.

Supreme Court of Hawai‘i.

Sept. 26, 2013.

As Corrected Sept. 26, 2013.

Mark Davis, Michael K. Livingston, Matthew C. Winter, Clare E. Connors, Honolulu, for petitioners.

William S. Hunt, Dianne Winter Brookins, Jan M. Vernon, David A. Abadir, Honolulu, for respondents.

RECKTENWALD, C.J., NAKAYAMA, ACOBA, and POLLACK, JJ., with ACOBA, J., concurring separately, and McKENNA, J., concurring separately.

Opinion of the Court by POLLACK, J.

Petitioners Michael Siopes and Lacey Siopes (collectively, " Siopeses") appeal from the Circuit Court of the First Circuit's (circuit court) March 5, 2012 orders granting the Motion to Compel Arbitration (Motion to Compel Arbitration) and the Motion to Stay Discovery and Other Pretrial Proceedings Pending a Ruling on the Motion to Compel Arbitration (Motion to Stay Discovery), filed by Respondents Kaiser Foundation Health Plan, Inc., Hawai‘'i Permanente Medical Group, Inc., and Kaiser Foundation Hospitals, Inc. (collectively, "Kaiser").

For the reasons set forth herein, we hold that the arbitration provision contained in the relevant contract is unenforceable based on the lack of an underlying agreement between Kaiser and Michael to arbitrate. Accordingly, Lacey is also not bound to arbitrate her claims in this case. The circuit court's orders are vacated and the case is remanded for further proceedings consistent with this opinion.

I.

A.

In 1998, Michael began working as a full-time teacher at a public school on Maui. Michael was presented with options for health insurance coverage through the Department of Education and the Hawai‘i State Teachers Association. The Hawai‘i Employer—Union Health Benefits Trust Fund (EUTF) "was established to provide a single health benefits delivery system for State and county employees, retirees, and their dependents."¹

Awakuni v. Awana, 115 Hawai‘i 126, 129, 165 P.3d 1027, 1030 (2007). See Hawai‘i Revised Statutes (HRS) Chapter 87A.

On May 26, 2003, Michael signed a one-page enrollment form entitled "EUTF Enrollment/Change Form for Active Employees" (Enrollment Form), enrolling in a Kaiser health plan offered through the EUTF.

In a section entitled "Premium Conversion Plan Elections," Michael selected a box providing:

ENROLL me in the Premium Conversion Plan (PCP) so that my monthly contribution for my health insurance benefit plans premiums will be paid using pre-tax payroll deducted monies, to the extent permitted. I have read and understand the PCP information provided in the instruction sheet.

(Emphasis added). The record does not include an instruction sheet or any evidence that an instruction sheet was provided to Michael.

Michael indicated that he was "Single" on the Enrollment Form and did not provide any information in the dependent coverage section of the form with respect to dependents to include in his selected plan. Lacey, who is presently married to Michael, has never been a Kaiser member. She did not sign the Enrollment Form.

At the bottom of the Enrollment Form, a signature box provides that the enrollee, by signing the Enrollment Form, makes the following certifications and affirmations² :

Certification: I certify that the information provided in this application is true and complete. I agree to abide by the terms and conditions of the benefit plans I selected. I authorize my employer or finance officer to set my effective dates of coverage and to make the pre-tax or after-tax deductions, adjustments or cancellations from my salary, wages, pension or other compensation for my monthly employee contribution in accordance with applicable laws, rules or regulations.

I affirm that any listed dependent child, aged 19 through 23, is attending a college, university or technical school as a full-time student.

I affirm that I have non-EUTF plan benefits for each Dual Coverage Plan I selected.

The Enrollment Form does not provide any other description or identification of what is referred to as the "terms and conditions of the benefit plans I selected"; nor does the Enrollment Form provide that the "terms and conditions" are stated in a separate document.

According to Kaiser, a 2003 Group Medical and Hospital Service Agreement (Group Agreement) entered into between Kaiser and the EUTF was applicable to Michael when he signed the Enrollment Form. However, the 2003 Group Agreement was not attached to the Enrollment Form or given to Michael prior to his signing the Enrollment Form. There is also no indication in the record that the agreement was subsequently provided to Michael. Additionally, the Enrollment Form itself contains no reference by name to a "Group Medical and Hospital Service Agreement" or to any agreement between Kaiser and the EUTF. The form also does not provide a space for the enrollee to acknowledge whether he or she has read and understood the Group Agreement, including the "terms and conditions" of the applicable benefit plan.

The 2003 Group Agreement that Kaiser states was applicable does not contain a section specifically titled "Terms and Conditions." In addition, the Group Agreement does not contain a signature line for a prospective or current Kaiser member to acknowledge that it was read or received prior to or after enrollment in the Kaiser plan.

Under a section entitled "Relations Among Parties Affected by Service Agreement," the Group Agreement provides that Kaiser members "authorize" the EUTF "for purposes of entering into this Service Agreement and for all other purposes in regards to this Service Agreement," although the provision does not explain what is meant by "all other purposes." Additionally, this section provides that "[a]ny notice to Group by Health Plan is deemed notice to the Members."³

A section entitled "Miscellaneous Provisions" includes a subsection titled "Service Agreement Binding on Members." The subsection provides: "By electing medical and hospital coverage pursuant to this Service Agreement, or accepting benefits hereunder, all Members legally capable of contracting, and the legal representatives of all Members incapable of contracting, agree to all terms, conditions and provisions of this Service Agreement."

Section 8 of the 2003 Group Agreement is entitled "Appeal and Arbitration Procedures" and begins on page 10 of the agreement. The arbitration section is titled and set forth in the same font as all other provisions in the agreement and is not otherwise distinguished from the other provisions. The arbitration provision states that it governs all claims "arising from an alleged violation of a legal duty incident to this Service Agreement" that are brought by a Kaiser member or representative against a Kaiser entity.⁴

This section on the scope of the arbitration clause also provides that "[b]enefit-related claims subject to Chapter 502(a)(1)(B) of the Employee Retirement Income Security Act (ERISA) are covered by this binding arbitration requirement," unless exempted by satisfying two conditions.⁵

The arbitration provision limits the scope of civil discovery to "relevant" documents, "brief depositions," and "independent medical evaluations," with the arbitrator designated to resolve any disputes:

Limited civil discovery shall be permitted for (1) production of relevant documents, (2) taking of brief depositions of parties and expert witnesses, and (3) independent medical evaluations. The arbitrator(s) shall resolve any discovery dispute submitted by any party.

In regard to arbitration fees, the arbitration provision requires that "fees and expenses of the arbitration service and the arbitrator(s) shall be borne equally by the two parties." Each party is required to "bear their own attorney fees."

In regard to confidentiality, the arbitration provision prohibits the disclosure of the terms or substance of the arbitration award except in limited circumstances:

F. Confidentiality. Neither party nor the arbitrator(s) may disclose the terms or substance of the arbitration award, except as required by law or as necessary to file a motion to confirm the award, and in that event, the parties shall take all appropriate action to request that the records of the arbitration be submitted to the court under seal.

The arbitration provision also states that the arbitration decision is "final and binding," that Kaiser members "waive their rights to jury or court trial," and that "[w]ith respect to any matter not expressly provided for herein, the arbitration shall be governed by [HRS] Chapter 658."

According to Kaiser, it "provides copies of the current Group Service Agreement to employers annually and they are responsible for making it available to their Kaiser member-employees for review. In addition, Kaiser employee-members may request a copy of the Group Service Agreement that is applicable to them by contacting Kaiser's Customer Service Department."

Kaiser also states that its Group Agreements are "reviewed and renegotiated with employers on an annual basis, as necessary." Kaiser attached a copy of its 2009 Group Agreement with its Motion to Compel Arbitration and argues that the 2009 Agreement governed the "rights and responsibilities" of Kaiser and Michael in 2009, "when the events at issue in this case occurred." As with the 2003 Group Agreement, there is no evidence in the record that the 2009 agreement was provided to Michael, other than Kaiser's assertion that it provides copies of the Group Agreement to employers.

The 2009 Group Agreement reflects several changes to the arbitration provisions as compared to the 2003 Group Agreement.⁶ The general provision providing that all claims are subject to binding arbitration⁷ and the confidentiality provision remained substantively unchanged.

However, the provision on ERISA was changed to provide that claims for...