The Hawaii Supreme Court struck down Kaiser Health Plan's mandatory arbitration agreement on Thursday that required Kaiser plan members to give up their right to a jury trial and arbitrate legal disputes, even if the plan member did not know or agree with the arbitration provision.
Kaiser maintained that all plan members were bound by an arbitration agreement regardless of whether the plan members actually knew and consented to a waiver of their right to trial by jury.
The Kaiser plan agreement required that plan members absorb portions of the cost of private arbitration and to have limited their ability to conduct discovery or attorney fees.
The arbitration agreement also requires strict confidentiality as to all legal disputes which the plaintiffs argued blocked the consumers' legitimate right to know about malpractice claims.
The case was brought by Maui high school teacher Michael Siopes and his wife Lacy when he was diagnosed with a rare form of cancer which Kaiser had never treated before and had almost no experience in mangaging.
Despite his Kaiser physician's recommendation that he be referred to a specialist on the mainland who was an expert, the Kaiser administration denied his request and refused to pay for his treatment. Siopes nonetheless sought treatment at Duke University which successfully treated his cancer. Faced with a $250,000 medical bill that should have been covered by Kaiser, according to attorneys, Siopes initiated a lawsuit which the lower court ordered to be arbitrated.
Siopes was faced with only recovering par the funds he had expended under the arbitration agreement while Hawaii state law would have allowed a full recovery in front of a jury. Siopes never signed the arbitration agreement and never knew about it.
Kaiser argued that because the arbitration was negotiated by his employer's representative, that he should be bound.
The court ruled that arbitration agreement are contracts and Kaiser had to prove that both parties had entered into the agreement with consent and that there was a "meeting of the minds" of the parties. Because this was no different from any other contract, ever Kaiser member must now individually consent and agree to the arbitration agreement.
The lower courts will now be required to review claims that terms of the arbitration are "fair" to both parties since an unconscionable contract term is defense to enforcement.