For Preemption Purposes, “Involving Commerce” In The FAA Is Broader Than “In Commerce”, Making It Easy To Find Preemption.
Physicians don’t like to defend medical malpractice cases in front of juries, and Scott v. Yoho, B265641 (2/5 6/22/16) (Turner, Kriegler, Kumar) will make it easier for them to arbitrate malpractice cases and avoid juries in California under a broadly worded arbitration provision.
After Kenisha Parker died, following lipoplasty and suction lipectomy, her relatives sued Dr. Yoho and New Body Cosmetic Surgery Center for wrongful death, malpractice, and survivorship causes of action. Defendants moved to compel arbitration, based on three arbitration agreements. The trial court found that the third agreement, which was the most recent, governed, but that it was unenforceable, because Ms. Parker, who died within hours of signing it, did not have the opportunity to rescind, as required by Cal. Code of Civ. Proc., section 1295(c).
Reversed. The Court of Appeal holds that the 30-day rescissionary period provided by section 1295(c) is preempted by the Federal Arbitration Act, because, “the rescission right only exists in the context of the provision of arbitration of medical care disputes.” Because this provision only applies in the context of arbitration, it is preempted by the FAA, which does not allow a state to place a greater burden on arbitration than on litigation. AT&T Mobility LLC v. Concepcion, 517 U.S. 333, 339 (2011). Thus, if the patient dies from medical malpractice shortly after signing the arbitration agreement, the statutory rescissionary right is of no effect, whenever the FAA applies.
While this part of the ruling invalidating a California statute protecting patient rights is important, so too is the Court’s conclusion that the FAA reached this transaction, given that the patient, the doctor, and the surgery occurred in California, and the contract provide for venue in LA Superior Court in Pasadena, and jurisdiction in California.
The uncontroverted evidence showed that 20 percent of the medical supplies were shipped from out of state, some of the materials used for liposuction came from out-of-state, defendants advertised on the internet and communicated out-of-state by telephone, mail and e-mail, 5% of the patients came from outside the state, and there were business contacts with various out-of-state businesses.
At first blush, this might still seem like an in-state commercial transaction, because the procedure was conducted in California by a California doctor on a California patient. But the Court holds that there is “a sufficient nexus with interstate commerce to require enforcement” of the agreements under the FAA. Relevant to the Court’s conclusion is that the FAA, specifically, 9 U.S.C. section 2, applies to transactions “involving commerce” – words that have been broadly interpreted to mean “affecting” commerce, which is broader even than “in commerce.” The fact that venue and jurisdiction provisions were local to California carried no weight, because the provisions did not govern choice of law.
That left the Court with the task of distinguishing Rodriguez v. Superior Court,176 Cal.App.4th 1461 (2009), a case that enforced the rescissionary right in section 1295. Easy: there was no issue concerning preemption by the FAA in Rodriguez. Here, the defendants made a factual showing as to why the transaction is governed by interstate commerce.