A resident at Harlem Hospital, Dr. Anyakora, allegedly refused to treat a woman in active labor despite a direct order from the hospital administrator. He was charged with violating disciplinary rules and committing a criminal act for failure to provide treatment. The patient sued Anyakora for medical malpractice, breach of the statutory duty to provide emergency treatment, and intentional infliction of emotional distress.
Dr. Anyakora requested that New York City represent and indemnify him in the civil action brought by the patient, pursuant to a collective bargaining agreement with his union. The City denied the request, citing public policy and Gen. Mun. Law § 50-k, which limit the obligation to defend public employees when the conduct violates the municipality's disciplinary rules and state law.
The union filed a grievance, alleging that the City's refusal violated the agreement's malpractice insurance provision. After a denial of the grievance, the union sought to compel immediate arbitration of the dispute and a stay of the civil action. The City sought a permanent stay of arbitration. The lower courts rejected the City's motions and required the parties to arbitrate the issue of representation. The City appealed that judgment.
Whether public policy or statutory law prohibit arbitration to determine a municipality's duty to defend and indemnify an employee under a medical malpractice insurance provision of a collective bargaining agreement.
No. Order affirmed, with costs.
The Court of Appeals held that the courts below correctly directed the submission of this dispute to arbitration. The court used the two-step test from Acting Supt. of Sch. of Liverpool Cent. Sch. Dist. v. United Liverpool Faculty Ass'n, 42 N.Y.2d 509, 513 (N.Y. 1977), to determine arbitrability: (1) whether the Civ. Serv. Law § 204 (Taylor Law) authorizes arbitration claims regarding the disputed subject matter, and (2) whether the terms of the arbitration clause include the subject area.
To answer the first question, a court must determine if a statute, case, or public policy prohibits arbitration of the subject matter. Here, the court examined provisions of the General Municipal Law. It found that the statute does not "impair, alter, limit or modify the rights and obligations" of insurers under their policies, or indemnification provided to government employees by the government. See § 50-k(7), (9). Nor do public policy concerns mandate the court's intervention. Disputes where all remedies violate public policy differ from those where only some or one remedy violates public policy. See, e.g., Board of Educ. v. Areman, 41 N.Y.2d 527 (N.Y. 1977) (inspection of teacher personnel files). If a remedy exists that does not violate public policy, courts should not preempt arbitration. See Port Washington Union Free Sch. Dist. v. Port Washington Teachers Ass'n, 45 N.Y.2d 411, 418 (N.Y. 1978).
Since neither statutory law nor public policy prohibits arbitration of the claim, the arbitration agreement between the City and the union determines the duties of the parties. The court found that this agreement provides for arbitration of all grievances. The meaning of the malpractice provision is a question of contract interpretation and is thus subject to arbitration.
The Supreme Court has expressed a rather critical view of prior New York case law on arbitrability. See United Steel Workers v. American Mfg., 363 U.S. 564, 566-67 (1960). The New York Appellate Division, in International Ass'n of Machinists v. Cutler-Hammer, Inc., 67 N.Y.S.2d 317 (1st Dept.), aff'd 297 N.Y. 519 (N.Y. 1947), held that "i]f the meaning of the provision of the contract sought to be arbitrated is beyond dispute, there cannot be anything to arbitrate and the contract cannot be said to provide for arbitration." United Steel Workers, 363 U.S. at 567 (quoting Cutler-Hammer, 67 N.Y.S.2d at 318). The Supreme Court called this approach a "preoccupation with ordinary contract law," and noted that a "collective agreement requires arbitration of claims that courts might be unwilling to entertain." United Steel Workers, 363 U.S. at 567. Perhaps this rebuke by the Supreme Court is behind the Court of Appeals' decision in Dinkins to avoid premature interference by courts.
The Court of Appeals has taken an approach similar to that laid out by the Nebraska Supreme Court in allowing arbitration while reserving the power to review the decision if necessary. This view is compatible with that espoused by the Supreme Court in United Steel Workers. Courts should both encourage arbitration on the front end of a dispute and retain the power of review following arbitration. In City of Lincoln v. Soukup, 340 N.W.2d 420, 423 (Neb. 1983), the court noted the "longstanding rule in Nebraska that a contract to compel parties to arbitrate future disputes and thus to oust the courts of jurisdiction to settle such disputes is against public policy and is void."
The court held the dispute to be arbitrable, but did not address what remedy the arbitrator could fashion to avoid violating public policy. Additionally, the court did not indicate what factors the arbitrator should take into account in fashioning a remedy (out of deference to the arbitrator), or how the factors chosen might affect the validity of the arbitration decision.
The court did not address what would occur if the civil action commenced before the arbitration was finished. Consequently, the possibility exists that a default judgment may be entered against Dr. Anyakora, followed by an arbitrator later ruling the municipality must defend and indemnify him. Alternatively, the doctor could have a default judgment entered against him after which the arbitrator rules that the municipality does not have to defend him. The court does not mention the effect, if any, an arbitration decision after the entry of a default judgment would have in these situations.
The court's holding prevents a municipality from relying on narrow statutory interpretation to stay arbitration on the question of whether the malpractice provision covers the civil suit against a municipality employee. Practitioners should note that a municipality can contractually provide greater coverage for public employees. The broad statutory language of Gen. Mun. Law § 50-k(7), (9) states that its provisions shall not "impair, alter, limit or modify" rights provided for governmental employees regarding obligations of insurers and defense or indemnification.
Although arbitration may be precluded on public policy grounds, the court reaffirmed the broad power of arbitrators to fashion remedies. The practitioner should note that the court will defer to the arbitrator to determine an appropriate remedy even when the particular remedy requested by one of the parties may violate public policy, so long as other remedies might be suitable. See Port Washington Union Free Sch. Dist. v. Port Washington Teachers Ass'n, 45 N.Y.2d 411, 418-19 (N.Y. 1978).
Once the first step of the court's test is satisfied, the second question, whether the terms of a particular arbitration clause include the specific subject area, should be easy to answer. Practitioners should look to broad language in the contract, such as "all grievances," which includes interpretation of terms of the agreement. This step of the test is also important for it is directed more toward contract formation. In preparing an agreement to include arbitration, the court acknowledges that it will interpret such clauses broadly.
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