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Reversing a trial court's confirmation of an arbitration award, a Washington appellate court held that the FAA does not preempt Washington's McCarran-Ferguson Act and that health care providers may not require arbitration that excludes judicial remedies.
In Jolley v. BlueShield, No. 57477-9-I, 2007 WL 1733215 (Wash. Ct. App. June 18, 2007), BlueShield, a health care provider, terminated a practitioner agreement it had with Dr. Jolley. Dr. Jolley unsuccessfully challenged the termination through BlueShield's internal appeals process. He then submitted arbitration claims against BlueShield asserting wrongful termination, violation of the Consumer Protection Act, and damages.
The arbitrator upheld BlueShield's termination ruling that Dr. Jolley failed to prove the termination was retaliatory or violated public policy. However, the arbitrator did conclude that an earlier termination was wrongful and awarded Dr. Jolley $28,403 in damages.
BlueShield then moved to confirm the award. Dr. Jolley objected arguing he was entitled to a trial de novo, as the arbitration under the practitioner agreement's terms was nonbinding. Additionally, he argued that state law prohibited BlueShield from requiring binding arbitration. The trial court confirmed the arbitration award and Dr. Jolley appealed.
Relying on the Washington Supreme Court's holding in Kruger Clinic Orthopedics, LLC. v. Regence BlueShield, 138 P.3d 936 (Wash. 2006), the Court held that the FAA does not preempt Washington's McCarran-Ferguson Act. The Act states, "no Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance." Although RCW 48.43.055 and WAC 284-43-322(4) allow health care providers to require nonbinding arbitration, neither the statutes nor Kruger permit "the exclusion of judicial remedies."
The Court rejected BlueShield's argument that Dr. Jolley waived his right to challenge the dispute resolution provision by initiating arbitration. The dispute resolution clause mandates arbitration "prior to seeking judicial remedy." Dr. Jolley did not challenge the dispute resolution provision's validity. Rather, he only asserted that the arbitration was nonbinding under the contract and Washington law.
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