Recent Developments in Dispute Resolution 7/05/97

Kaiser arbitration / Fraud?  Waiver?

Engalla v. [Kaiser] Permanente Medical Group (California Supreme Court, Jun 30, 1997)

     Is Kaiser's medical malpractice arbitration program vulnerable
     to claims of fraud and waiver?

     Wilfredo Engalla died while his arbitration was pending.  His
     survivors sued for malpractice and fraud, and claimed fraud
     and waiver as defenses to enforcement of the arbitration
     agreement.  The California Supreme Court found (1) there is
     evidence of fraud by misrepresenting the speed of the
     arbitration program, and (2) dilatory actions may constitute
     a waiver of Kaiser's right to compel arbitration.  The court
     remanded to the trial court to decide whether fraud actually
     took place, and to decide whether there was a waiver.

                           Fraud claim

     The fact that Kaiser designed and administered its arbitration
     program from an adversarial perspective was not disclosed to
     subscribers.  The program was administered by outside counsel
     retained to defend Kaiser in an adversarial capacity.  The
     arbitration agreement stated that one arbitrator shall be
     chosen by each party within 30 days, a neutral arbitrator
     shall be chosen within 60 days, and the arbitration hearing
     shall be held "within a reasonable time."  In reality, a
     neutral arbitrator was chosen within 60 days in only 1 percent
     of the cases, with only 3 percent chosen within 180 days, and
     on average it took 674 days to appoint the neutral and 863
     days to reach an arbitration hearing.

                          Waiver claim

     Kaiser knew Engalla was dying of cancer.  Kaiser's lawyer (the
     program's administrator) refused to designate its arbitrator
     until after Engalla designated his, and took 47 days to
     designate an arbitrator.  Although Kaiser's arbitrator was not
     available until after Engalla's expected date of death, Kaiser
     refused to designate another arbitrator.  After a number of
     other events, omitted here, a neutral arbitrator was
     designated 144 days after initial service of the claim.
     Engalla died the next day.

Full text --

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           "Recent Developments in Dispute Resolution"
       Willamette University Center for Dispute Resolution
       Willamette University College of Law, Salem, Oregon
       Ross Runkel, Editor         Richard Birke, Director
       rrunkel@willamette.edu        rbirke@willamette.edu
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