Opinion ID: 6491398
Heading Depth: 3
Heading Rank: 2

Heading: The Arbitrability of the Claims

Text: “Although the public policy underlying Hawaii law strongly favors arbitration over litigation, the mere existence of an arbitration agreement does not mean that the parties must submit to an arbitrator disputes which are outside the scope of the arbitration agreement.” Brown v. KFC Nat’l Mgmt. Co., 82 Hawai'i 226, 244, 921 P.2d 146, 164 (1996) (citation and internal quotation marks omitted). “What issues, if any, are beyond the scope of a contractual agreement to arbitrate depends on the wording of the contractual agreement to arbitrate.” Rainbow Chevrolet, Inc. v. Asahi Jyuken (USA), Inc., 78 Hawai'i 107, 113, 890 P.2d 694, 700 (App.1995), superseded by statute as stated in, Ueoka v. Szymanski, 107 Hawai'i 386, 114 P.3d 892 (2005) (emphasis added). Essentially, the plaintiffs argue that the claims asserted in their complaints fall outside the scope of the arbitration clause: [Arbitration is the second step in a two-step process that begins with an administrative appeal of an HMSA “decision.” Thus, what is intended to be appealed administratively and then arbitrated are specific “decisions,” not broad grievances relating to the institution-wide policies and practices that control those decisions. Consequently, [the plaintiffs’] claims are not governed by the PAR Agreement dispute resolution procedures. (Emphases added.) HMSA disagrees, contending that the dispute resolution procedures, including the arbitration clause, applies to the plaintiffs’ claims for relief. Specifically, HMSA directs this court to the first paragraph of section 8.3 of Article VIII of the PAR Agreement, which states that the arbitration clause covers “any and all claims, disputes or causes of action arising out of ... or in any way related to this Agreement or its performance.” As previously stated, the first paragraph of section 8.3 states: 8.3 Arbitration Upon Exhaustion of Administrative Appeal. HMSA and Participating Physician agree that, except for disputes related to HMSA’s Schedule of Maximum Allowable Charges, any and all claims, disputes, or causes of action arising out of this Agreement or its performance, or in any way related to this Agreement or its performance, including but not limited to any and all claims, disputes, or causes of action based upon contract, tort, statutory law, or actions in equity, shall be resolved by binding arbitration as set forth in this Agreement. (Underscored emphasis in original.) (Bold emphases added.) At first glance, the above-language, standing alone, appears to mandate binding arbitration of all disputes arising out of the Agreement or its performance. However, a contract “should be construed as a whole and its meaning determined from the entire context and not from any particular word, phrase, or clause.” Hawaiian Isles Enters., Inc. v. City & County of Honolulu, 76 Hawai'i 487, 491, 879 P.2d 1070, 1074 (1994) (citation and internal quotation marks omitted). First, section 8.3 is entitled “Arbitration Upon Exhaustion of Administrative Appeal,” and the first paragraph states that any disputes “shall be resolved by binding arbitration as set forth in this Agreement.” (Emphases added.) Second, the second and third paragraphs of section 8.3 provide that: Within 30 calendar days following Participating Physician’s exhaustion of administrative remedies described in Sections 8.1 and 8.2 above, Participating Physician shall submit a mitten request for arbitration to Legal Services at HMSA in Honolulu, Hawaii.... The arbitration shall be conducted by a single arbitrator .... Fees and costs of the arbitrator and the arbitration service may be awarded by the arbitrator as the arbitrator determines is appropriate. If no award is made, fees and costs of the arbitrator and the arbitration service shall be shared equally by both parties. The decision of the arbitrator shall be final and binding on both parties. (Emphases added.) By their plain terms, the above two paragraphs “set forth” the requirements that: (1) the arbitration procedure is triggered only after exhaustion of the administrative remedies prescribed in sections 8.1 and 8.2; and (2) the fees and costs of the arbitration proceeding may be awarded by the arbitrator or be shared equally by the parties. Consequently, to trigger the arbitration clause of section 8.3, the claim or dispute must have completed the administrative appeal process set forth in sections 8.1 and 8.2 of the Agreement. As previously quoted, section 8.1(a) 15 states in relevant part: 8.1 Administrative Appeal (a) Dispute Other Than Termination (Section 7.2) or Immediate Termination (Section 7.3) of This Agreement. If Participating Physician disagrees with a decision by HMSA, Participating Physician shall submit a written request for review by an HMSA review committee composed of practicing physicians within one year of Participating Physician’s receipt of notice of such decision. The review committee shall convene -within 60 calendar days of HMSA’s receipt of the request for review. Participating Physician and one other witness who is also a physician may appear to present evidence or testimony before a review committee. Participating Physician will be notified of the review committee’s decision within 10 working days following the hearing. (Underscored emphases in original.) (Bold emphasis added.) HMSA points out that “the PAR Agreements] arbitration clause refers to only two parties in any arbitration: HMSA and a ‘Participating Physician’ (singular, not plural), and repeatedly notes the proceeding only involves these two parties, with provisions applicable to ‘both’ parties (i.e., the two named parties)[.]” (Parentheticals in original.) In other words, section 8.1(a) requires an individual participating physician to submit disputes (other than those related to termination) to an HMSA review committee when the individual physician disagrees with a decision by HMSA. 16 Accordingly, when viewing (1) section 8.3’s specific title, “Arbitration Upon Exhaustion of Administrative Appeal,” and (2) its specific reference to the administrative remedies prescribed in section 8.1 within the context of the entire dispute resolution provision, we agree with HMSA and conclude that the arbitration clause in Article VIII contemplates binding arbitration between a single participating physician and HMSA over a dispute that arises from a decision of HMSA. Stated differently, Article VIII requires that “all claims, disputes, or causes of action,” arising from a decision of HMSA regarding the PAR Agreement or its performance shall first be administratively appealed by an individual physician pursuant to section 8.1 and, thereafter, adjudicated via binding arbitration, pursuant to section 8.3. Consequently, we next examine whether sections 8.1(a) and 8.3 apply to the plaintiffs, who bring their claims as a collective group, and whether the claims they assert fall within the scope of the arbitration agreement. As previously stated, the plaintiffs’ complaints essentially contain two counts, alleging: (1) HMSA’s engagement in a scheme to delay and impede lawful reimbursement to the physician-plaintiffs, as well as other participating physicians who are HMA members, in violation of HRS chapter 480; and (2) HMSA’s tortious interference with prospective economic advantage. 17 The plaintiffs, collectively, claim that HMSA has engaged in unfair methods of competition based upon HMSA’s conduct involving numerous systemic, unfair and deceptive acts and practices. Thus, having asserted their claims collectively, as opposed to individually, the plaintiffs—as a group—are not subject to the requirements of section 8.1(a). Indeed, as the plaintiffs argue—and we agree— the necessary system-wide relief could never be granted in an individual proceeding where the specific issue being addressed is one isolated decision or a series of decisions relating to one physician.... [T]he Agreement’s administrative remedies by design are not adequate to provide relief for the types of claims alleged here. [The plaintiffs] have no means for placing evidence of broad-based, systemic wrongs before an internal review panel, whether by aggregating the claims of multiple physicians, permitting extensive discovery of HMSA or allowing testimonial evidence of more than merely two persons. All such avenues are foreclosed under the terms of the PAR AgreementPs] administrative appeal procedures. (Bold emphasis in original.) Accordingly, we conclude that the plaintiffs’ claims of unfair methods of competition are not claims for which the dispute resolution provision, including the arbitration clause, was contemplated. 18 It, therefore, follows that the plaintiffs’ claims of tortious interference with prospective economic advantage—involving the plaintiffs’ collective assertion that HMSA’s alleged intentional and malicious unfair and deceptive acts and oppressive business practices were designed to delay, deny, and reduce lawful reimbursement, thereby disrupting and impeding their relationships with their patients—are, likewise, not claims contemplated by the PAR’s dispute resolution procedures. Consequently, we hold that the circuit court erred in compelling arbitration. Preliminarily, however, before addressing whether the plaintiffs can maintain their claims for violation of HRS chapter 480 and tortious interference with prospective economic advantage in the circuit court, we must examine whether HMA has standing to bring the present action (1) on behalf of its physician members and (2) on its own behalf.