State Supreme Court strikes down mandatory arbitration agreement

A Hawaii Supreme Court opinion struck down Kaiser Foundation Health Plan’s mandatory arbitration agreement that required members to give up their right to a jury trial, in a lawsuit brought by a Maui High School science teacher whose life-saving cancer treatment wasn’t covered by his Kaiser health insurance.

The opinion issued Thursday by the high court is for publication, meaning it affects all Kaiser subscribers in Hawaii as well as people who may be affected by other arbitration contracts, said attorney Matthew Winter of Davis Levin Livingston.

The Honolulu law firm is representing Michael Siopes and his wife, Lacey, who sued Kaiser entities in 2011, alleging doctors misdiagnosed his rare form of cancer and later refused to cover the costs of treatment elsewhere that saved his life.

Despite his Kaiser physician’s recommendation that he be referred to a specialist on the Mainland who was an expert, the Kaiser administration denied his request and refused to pay for his treatment, according to the lawsuit. Siopes was faced with a $250,000 medical bill at Duke University, where his neuroendocrine cancer was successfully treated in 2010.

Last year, a 1st Circuit Court order in the case required the Siopeses to arbitrate their claims against Kaiser. The court said all plan members were bound by an arbitration agreement regardless of whether members knew about and consented to a waiver of their right to a jury trial.

The Kaiser plan agreement requires that members absorb portions of the cost of private arbitration and also limited members’ ability to conduct discovery or recover attorneys’ fees. The agreement also requires confidentiality regarding legal disputes, which the Siopeses argued blocked consumers’ right to know about malpractice claims.

Michael Siopes didn’t sign the arbitration agreement and didn’t know about it, according to his attorneys. Kaiser maintained that Siopes should nevertheless be bound by the agreement because the arbitration was negotiated by his employer’s representative.

Under the arbitration agreement, Siopes faced the possibility of recovering only part of the money he would have been forced to spend toward the cost of the arbitration itself, his attorneys said, even though Hawaii law would have allowed a full recovery in a jury trial.

The agreement also would have kept the Siopeses from recovering their attorney costs.

In its 56-page opinion authored by Justice Richard Pollack, the Supreme Court vacated the Circuit Court order requiring arbitration and sent the case back to the trial court.

“We hold that the arbitration provision contained in the relevant contract is unenforceable based on the lack of an underlying agreement between Kaiser and Michael to arbitrate,” the opinion says.

“There’s no limitations as to how he can proceed in the case,” Winter said Friday. “We’re not only happy for Mike, we’re happy for all Hawaii consumers that might find themselves in a situation where they’re forced into arbitration in a situation where they did not consent to the arbitration or they did not have a full understanding.”

Kaiser spokeswoman Laura Lott said by email Friday that “it would be inappropriate to comment at this time.”

“We were just notified of the ruling yesterday, and we have not had a chance to review it in detail,” she said.

In a statement, attorney Mark Davis of Davis Levin Livingston said that the Siopeses “are very pleased with the decision that relieved them from being required to be bound to an agreement that they had never seen nor signed.”

“The problem with the arbitration agreement, which is not obvious, is that the agreement limits and gives up remedies that are guaranteed by state law. This will level the playing field between Kaiser and its plan members and avoid Kaiser’s attempts to ‘stack the deck’ when plan members have legal claims.”

Winter said Michael Siopes underwent a CT scan with positive results this week, in addition to the favorable Supreme Court opinion. Siopes and his wife are still making monthly payments to Duke University, with his wife working overtime, Winter said.

“They still continue to suffer,” he said.

* Lila Fujimoto can be reached at