Opinion ID: 1246465
Heading Depth: 1
Heading Rank: 6

Heading: application of the state action tests to the facts of these cases

Text: A. State Command or Encouragement of Private Action As indicated above, the plaintiffs object on due process grounds to the state's enforcement of their private arbitration agreement since the agreement complies with the MMAA provisions regulating the arbitration process. The issue is whether the state has commanded or encouraged or placed its imprimatur on the private actions so as to transform them into state actions. It is uncontroverted that the state, by enacting the MMAA, does not require anyone to arbitrate. It does, however, establish and regulate an acceptable process of arbitration of medical malpractice claims. In effect, the state enforces the private decision to elect complying arbitration over traditional litigation. In doing so, the state sets the standard for enforceable arbitration agreements in medical malpractice cases and establishes the acceptable procedure for medical malpractice arbitration. The question is whether such action constitutes command and encouragement sufficient to attribute the private parties' agreement to arbitrate according to state law to the state. The answer, we think, according to analogous United States Supreme Court cases, is clearly no. In providing that if a private person elects to arbitrate a medical malpractice claim the claim shall be heard by a three-member panel which includes a doctor or a hospital administrator, the statute does not constitute state action through command or encouragement. The result is the same whether one relies primarily upon Flagg Bros, Jackson, or Blum. In Flagg Bros, the state enacted a statute which provided that an individual bailee could sell a bailor's property to pay an overdue bill if the bailee complied with the statute by giving notice, holding the sale in a particular way, and meeting other requirements. The state did not require that the bailee sell the bailor's goods; it only provided that the bailee could elect to do so without intervention by the state. But, when the bailee sold the bailor's goods, the state would not use its courts to correct the sale or punish the bailor. [4] As the United States Supreme Court noted: Here, the State of New York has not compelled the sale of a bailor's goods, but has merely announced the circumstances under which its courts will not interfere with a private sale. Indeed, the crux of respondents' complaint is not that the State has acted, but that it has refused to act. This statutory refusal to act is no different in principle from an ordinary statute of limitations whereby the State declines to provide a remedy for private deprivations of property after the passage of a given period of time. Flagg Bros, supra, p 166. In the cases before us, the state has not compelled the private parties to arbitrate before a panel composed of a lawyer, a doctor or hospital administrator, and a layperson. Instead, it has created a system which private persons may elect to use. If arbitration is elected, and if there is compliance with the statute, the state will not allow a party to void the arbitration agreement by suing in an ordinary civil action. To paraphrase the United States Supreme Court in Flagg Bros: Here, the State of Michigan has not compelled the parties to arbitrate their disputes concerning medical malpractice, but has merely announced the circumstances under which its courts will not interfere with a private agreement to arbitrate medical malpractice disputes. Indeed, the crux of plaintiffs' complaint is not that the state has acted, but that the state has refused to act to prohibit private agreements to arbitrate before a three-person panel, one of whom is a doctor or a hospital administrator. The statutory refusal to act is no different than an ordinary statute of limitations by which the state declines to provide a civil trial remedy for medical malpractice after the passage of a given period of time. In Jackson, supra, p 357, the United States Supreme Court held that the public utility acted privately when it cut off plaintiff's service despite the fact that the state had approved the practice when it approved the utility's general tariff. At most, the Commission's failure to overturn this practice amounted to no more than a determination that a Pennsylvania utility was authorized to employ such a practice if it so desired. Respondent's exercise of the choice allowed by state law where the initiative comes from it and not from the State, does not make its action in doing so `state action' for purposes of the Fourteenth Amendment. As applied to these cases, Jackson supports the conclusion that the State of Michigan, through the MMAA, merely afforded an alternative to private parties who have medical malpractice disputes. The initiative to accept the state-regulated medical malpractice arbitration system does not constitute state action. It merely constitutes a private choice which is permitted and, if chosen, is enforced by the state. Finally, in Blum, supra, p 1005, the United States Supreme Court explicitly distinguished between state response to private actions and state responsibility for private actions. That the State responds to such actions by adjusting benefits does not render it responsible for those actions. The decisions about which respondents complain are made by physicians and nursing home administrators, all of whom are concededly private parties. There is no suggestion that those decisions were influenced in any degree by the State's obligation to adjust benefits in conformity with changes in the cost of medically necessary care. Here, the state certainly responds to private decisions to arbitrate medical malpractice claims. Those which conform with the state's statutory standard are enforced; those which do not conform with the statutory standard are not enforced. This is not, however, a situation in which the state is responsible for the private decision. Whether private parties choose to arbitrate and what terms they agree upon are not controlled by the state. Private parties may do as they please. However, the state responds according to its stated position which is articulated in the MMAA. The decisions about which the plaintiffs complain, whether to arbitrate and the composition of the arbitration panel, are private decisions of private parties. There is no suggestion that those decisions are mandated in any degree by the state's decision to enforce medical malpractice arbitration agreements which comport with the MMAA. Therefore, there is no imprimatur or command or encouragement state action in these cases. The state's regulation of medical malpractice arbitration does not alter this conclusion. For purposes of the Fourteenth Amendment, the state's enforcement of or response to private decisions does not constitute state action. B. Performance of a Traditionally Exclusively Governmental Function The private choice to arbitrate as allowed by state law does not constitute private performance of a traditionally exclusively governmental function. While resolution of private disputes has traditionally been performed by the state through its courts, the state was not the only entity performing private dispute resolution. As the United States Supreme Court recognized, a statutory system of rights and remedies, recognizing the traditional place of private arrangements in ordering relationships in the commercial world, can hardly be said to have delegated to [the private party] an exclusive prerogative of the sovereign. Flagg Bros, supra, p 160. There the state allowed self-help sales in bailor-bailee situations; here the state allows and enforces private agreements to arbitrate. In both cases, the method of self-help or arbitration is closely regulated. But, the fact remains that the state has not and is not the exclusive decisionmaker concerning private disputes. This is another instance which proves correct the Supreme Court's statement that while many functions have been traditionally performed by governments, very few have been `exclusively reserved to the State'. Flagg Bros, supra, p 158. Private civil dispute resolution is not a traditionally exclusively governmental function for which the state's acquiescence in performance by private parties constitutes state action. The deprivation occurs because of a private decision which does not constitute the performance of a governmental function. C. Symbiotic Relationship The private decision to arbitrate as allowed by the MMAA does not create a symbiotic relationship between the state and the private parties to the arbitration agreement. The state's relationship with the private decision is merely to enforce the private decisions which are in accordance with state law. In Blum, supra, p 1010, the United States Supreme Court held that no such relationship exists between the State and the nursing homes it regulates that the State may be considered a joint participant in the homes' discharge and transfer of Medicaid patients. The Court found no relationship even though the state subsidized the capital and operating expenses of the nursing homes, the state paid for the medical expenses of 90% of the nursing home patients, and the state licensed the nursing homes. In these cases, the state's participation in the challenged activity does not reach the level of regulation and subsidization involved in Blum, let alone the level of lessor-lessee involved in Burton. The state's relationship to the activity challenged in these cases is like that in Jackson and Flagg Bros. The state allows or enforces the private decision, but does not seek direct benefit from the challenged activity. Therefore, there is no symbiotic relationship state action in these cases. D. Conclusion We conclude, therefore, that since there is no state action of Fourteenth Amendment proportions in these cases, the Fourteenth Amendment's due process concerns are not implicated. Consequently, we need not consider whether there is a constitutionally cognizable life, liberty, or property interest, or whether there is a deprivation without due process of law. The MMAA, with its requirement that a doctor or hospital administrator sit on the arbitration panel, does not deprive the plaintiffs of an impartial decisionmaker in violation of the Fourteenth Amendment. [5]