763 S.E.2d 338
N.C. Ct. App.2014Background
- Plaintiffs King and O'Neal sues for medical malpractice in Cumberland County; Bryant performed laparoscopic hernia repair in 2009.
- Defendants move to stay proceedings and compel arbitration under Village Surgical Associates’ arbitration agreement.
- Arbitration agreement, signed April 29, 2009, provided for three arbitrators, with at least one physician, and stated rules would be determined by the parties with AAA guidance; not a precondition to care.
- Trial court on March 12, 2012 denied arbitration; found issues of indefiniteness and nonbinding nature; King I remanded for unconscionability analysis given physician-patient fiduciary relationship.
- On remand, court found fiduciary relationship, constructively fraudulent and unconscionable arbitration terms toward King; O’Neal not a signatory; motion to compel arbitration denied; defendants appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the arbitration agreement procedurally unconscionable? | King argues lack of disclosure and fiduciary concealment in signing. | Bryant/ Village claim no procedural unconscionability; adequate disclosure occurred. | Yes, procedurally unconscionable. |
| Is the arbitration agreement substantively unconscionable? | Terms are one-sided and oppressive, limiting rights and foreclosing court access. | Terms are permissible and not per se unconscionable under FAA precedents. | Yes, substantively unconscionable. |
| Did a fiduciary relationship exist affecting the unconscionability analysis? | Fiduciary duty requires full disclosure; non-disclosure supports unconscionability. | Fiduciary status not material to enforceability arguments. | Law of the case established fiduciary relationship; burden on defendants to show fair disclosure. |
| Does the FAA govern and limit state unconscionability defenses in this arbitration? | FAA allows state unconscionability defenses; arbitration should be rejected if unconscionable. | FAA preempts some state defenses; results depend on Torrence/Concepcion framework. | FAA governs; arbitration found unconscionable under applicable framework. |
Key Cases Cited
- Tillman v. Commercial Credit Loans, Inc., 362 N.C. 93 (N.C. 2008) (unconscionability standards; procedural/substantive analysis)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (U.S. 2011) (FAA preempts state rule prohibiting class waivers; unconscionability limits)
- American Express Co. v. Italian Colors Rest., 570 U.S. 243 (U.S. 2013) (FAA does not permit courts to invalidate arbitration for lack of class arbitration)