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The Tennessee Court of Appeals was unpersuaded by a class of physicians who argued that the cost of arbitrating several individual payment disputes meant it was too expensive to arbitrate a deceptive practices class action against a health insurance company. The Court found that this argument was meritless since it compared an individual lawsuit to a multi-claim class action.
In Rosenberg v. BlueCross BlueShield of Tennessee, Inc., No. M2005-01070-COA-R9-CV, 2006 WL 3455209 (Tenn. Ct. App. Nov. 29, 2006), two physicians who provided services under contracts with Blue Cross Blue Shield Tennessee (BCBST) brought a putative class action BCBST alleging deceptive practices relating to the insurer’s payments to its physicians. BCBST filed a motion to compel arbitration, which was granted by the trial court over the physicians’ objection that arbitration was “cost-prohibitive.” The physicians appealed.
In support of their appeal, the physicians argued that the cost of arbitrating each individual claim for underpayment would be cost-prohibitive, such that the physicians would not have a forum to redress their small claims. But the Court held that this argument did not bear upon the instant case because individual suits were not alleged. What was alleged was a multi-plaintiff, multi-count class action involving millions of dollars in potential damages. As the Court put it, for purposes of justifying a class action, the physicians alleged “that their damages are great indeed.” But in arguing that the arbitration was cost-prohibitive, the physicians “assert[ed] their claims are of minimal value.”
The Court further explained that to succeed in arguing that arbitration was cost-prohibitive, the physicians needed to produce “specific evidence” of the costs of arbitration vis-à-vis litigation. With this information at its disposal, the Court would be able to determine if the arbitration agreement was unconscionable based upon (1) the claimant’s alleged inability to pay arbitration fees and costs, (2) the cost differential between court and arbitration, and (3) whether the differential was so significant that it deterred claims. Since the physicians produced no such evidence, the Court affirmed the order compelling arbitration.
In the absence of concrete evidence, courts consistently refuse to invalidate arbitration agreements as cost-prohibitive. This approach is consistent with the strong federal policy favoring arbitration. As the Court explained, “a party challenging the arbitration provisions of a contract, particularly when those provisions are clear and unambiguous, faces a figurative tsunami of case law, both federal and state, ever strengthening and reinforcing the favored status of arbitration.”
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