Hawaii Med. Ass'n v. Hawaii Med. Service

Page 1179

148 P.3d 1179

HAWAII MEDICAL ASSOCIATION, Plaintiff-Appellant, v. HAWAII MEDICAL SERVICE ASSOCIATION, INC., Defendant-Appellee.

Maxwell Cooper, M.D., and Michon Morita, M.D., on behalf of themselves and all others similarly situation, Plaintiffs-Appellants, v. Hawaii Medical Service Association, Inc., Defendant-Appellee.

No. 25923.

No. 25924.

Supreme Court of Hawaii.

September 8, 2006.

Reconsideration Denied October 25, 2006.

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Warren Price, III and Rick J. Eichor (of Price Okamoto Himeno & Lum); Robert F. Miller, Honolulu; and Pamela M. Parker, pro hac vice (of Lerach Coughlin Stoia Geller Rudman & Robbins, San Diego); Edith M. Kallas and Joseph P. Guglielmo, pro hac vice (of Milberg Weiss Bershad Hynes & Lerach, New York), on the briefs, for plaintiff-appellant in appeal No. 25923 and for plaintiffs-appellants in appeal No. 25924.

Ellen Godbey Carson and Paul Alston (of Alston Hunt Floyd & Ing), Honolulu, and Robert Carson Godbey and Jess H. Griffiths (of Godbey Griffiths Reis), Honolulu, on the briefs, for defendant-appellee in appeal Nos. 25923 & 25924 Nos. 25923 & 25924.

MOON, C.J., LEVINSON, J., and Circuit Judge BLONDIN, in place of DUFFY, J.; recused; ACOBA, J., concurring and dissenting separately, with whom NAKAYAMA, J., joins.

Opinion of the Court by MOON, C.J.

Inasmuch as appeal Nos. 25923 and 25924 present identical relevant facts and similar legal issues, we consolidated these appeals for purposes of disposition, pursuant to Hawai`i Rules of Appellate Procedure (HRAP) Rule 3(b) (2004).<sup>1</sup> Central to both appeals are the interpretation of an arbitration agreement and whether the plaintiffs in both actions have stated claims of unfair methods of competition, in violation of Hawai`i Revised Statutes (HRS) § 480-2 (1993 & Supp.2005), quoted infra, and tortious interference with economic advantage.

The parties to appeal No. 25923 are plaintiff-appellant Hawaii Medical Association (HMA) and defendant-appellee Hawaii Medical Service Association (HMSA) [hereinafter, the HMA Appeal]. HMA commenced its action against HMSA on its own behalf and on behalf of its "over 1,600 physician members," who are participating physicians in HMSA's physician network. The parties to appeal No. 25924 are plaintiffs-appellants Maxwell Cooper, M.D. and Michon Morita, M.D., who are members of HMA [hereinafter, collectively, the physician-plaintiffs] and defendant-appellee HMSA [hereinafter, the Cooper Appeal].

Each of HMA's physician members became a "participating physician" by individually entering into a Participating Physician Agreement [hereinafter, the PAR Agreement or the Agreement]² with HMSA to provide medically necessary healthcare services to HMSA's plan members in exchange for HMSA's payments at specified rates. Notably, HMA is not a signatory party to the Agreement. Briefly stated, HMA and the physician-plaintiffs asserted claims against HMSA for violation of HRS chapter 480 and tortious interference with prospective economic advantage, alleging that HMSA's wrongful conduct (1) constituted unfair methods of competition and (2) delayed, impeded, denied or reduced reimbursement owed to HMA's physician members. HMA further alleged that HMSA's wrongful conduct has resulted in direct and substantial harm to HMA and its members.

In the HMA Appeal, HMA appeals from a final judgment of the Circuit Court of the First Circuit, the Honorable Dexter D. Del Rosario presiding, entered on June 6, 2003 in favor of HMSA, pursuant to the May 23, 2003 order granting HMSA's motion for judgment on the pleadings. Specifically, HMA challenges, inter alia, the circuit court's rulings that HMA: (1) lacked standing to assert claims on behalf of its physician members because its claims fell within the dispute resolution procedures contained in the PAR Agreement; (2) lacked standing to assert claims on its own behalf because it had not suffered a cognizable injury; (3) was barred from bringing a HRS § 480-2 claim of unfair methods of competition; and (4) failed to allege an actionable claim of tortious interference with prospective economic advantage.

In the Cooper Appeal, the physician-plaintiffs appeal from a separate June 6, 2003 final judgment, also entered by Judge Del Rosario, challenging a separate order of the circuit court, also filed on May 23, 2003, (1) granting HMSA's motion to dismiss or stay the proceedings and to compel individual arbitration [hereinafter, motion to compel arbitration] pursuant to the PAR Agreement's dispute resolution provision, (2) denying the physician-plaintiffs' discovery requests, and (3) granting HMSA's motion for judgment on the pleadings. Specifically, the physician-plaintiffs contend that the circuit court erred in: (1) concluding that the dispute resolution provision was valid, enforceable, and not unconscionable; (2) ruling that the claims alleged in the complaint fell within the scope of the dispute resolution provision; (3) dismissing the physician-plaintiffs' claims on the ground that they failed to first exhaust the administrative appeal process set forth in the dispute resolution provision; (4) refusing to allow the physician-plaintiffs to conduct discovery; and (5) dismissing their claims of unfair methods of competition and tortious interference with prospective economic advantage.

As discussed more fully herein, we hold that: (1) the claims of unfair methods of competition falls outside the scope of the arbitration clause; (2) the physician-plaintiffs and HMA are entitled to bring their claims in court; (3) the claims of unfair methods of competition based upon HMSA's alleged wrongful conduct prior to June 28, 2002 are barred inasmuch as HRS § 480-2(e) (Supp. 2005) does not apply retroactively; (4) because the plaintiffs need not be competitors of, or in competition, with HMSA, the claims of unfair methods of competition based upon HMSA's alleged wrongful conduct after June 28, 2002 are not barred; and (5) the physician-plaintiffs and HMA, on behalf of its members, have sufficiently stated claims of tortious interference with prospective economic advantage. Consequently, we affirm in part and vacate in part the June 6, 2003 final judgments entered in the HMA and Cooper Appeals.

I. BACKGROUND

It is undisputed that HMA's physician members, including the physician-plaintiffs, became "participating physicians" with HMSA, a non-profit, mutual benefit society providing health plans for its members, when they entered into individual PAR Agreements. The Agreement, including the dispute resolution provision at issue, was amended in January and September 2000. Article VIII of the Agreement, entitled "Dispute Resolution" [hereinafter, Article VIII or the dispute resolution provision], as amended, provides in its entirety:

VIII. DISPUTE RESOLUTION

This Article VIII applies to all sections of the Agreement, notwithstanding reference in selected sections.

8.1 Administrative Appeal

(a) Dispute Other Than Termination (Section 7.2) or Immediate Termination (Section 7.3) of This Agreement. If Participating Physician disagrees with a decision by HMSA, Participating Physician shall submit a written request for review by an HMSA review committee composed of practicing physicians within one year of Participating Physician's receipt of notice of such decision. The review committee shall convene within 60 calendar days of HMSA's receipt of the request for review. Participating Physician and one other witness who is also a physician may appear to present evidence or testimony before a review committee. Participating Physician will be notified of the review committee's decision within 10 working days following the hearing.

(b) Termination of This Agreement. Participating Physician shall submit a written request for appeal within 60 calendar days of receipt of a notice of termination from HMSA. A review committee composed of practicing physicians shall convene within 30 calendar days of HMSA's receipt of the request for appeal. Participating Physician may appear to present evidence or testimony before the committee. Either party may, at its option, be represented by counsel or another representative at the appeal. Participating Physician will be notified of the review committee's decision within five working days following the hearing.

(c) Neither HMSA nor Participating Physician shall be represented by an attorney or other representative at the administrative appeal pursuant to this Section 8.1, except as provided in Section 8.1(b) above. Both HMSA and Participating Physician may be represented by counsel or another representative at arbitration in accord with Section 8.3 below.

8.2 Expedited Benefits Redetermination. Participating Physician may request an expedited redetermination of any HMSA decision to deny payment for a service that has not yet been provided to a Member. Participating Physician shall request an expedited redetermination and provide any additional information requested by HMSA. HMSA shall provide a decision in accord with national timeliness standards set forth in the Provider Handbook. If Participating Physician disagrees with the expedited redetermination decision, Participating Physician shall request an appeal in accord with Section 8.1(a) above.

8.3 Arbitration Upon Exhaustion of Administrative Appeal [[hereinafter, the arbitration clause]]. HMSA and Participating Physician agree that, except for disputes related to HMSA's Schedule of Maximum Allowable Charges, any and all claims, disputes, or causes of action arising out of this Agreement or its performance, or in any way related to this Agreement or its performance, including but not limited to any and all claims, disputes, or causes of action based upon contract, tort, statutory law, or actions in equity, shall be resolved by binding arbitration as set forth in this Agreement.

Within 30 calendar days following Participating Physician's exhaustion of...