North Carolina court rejects arbitration without consent.

An arbitration agreement unwittingly signed is not valid, the North Carolina Supreme Court ruled in March in Milon v. Duke University. (559 S.E.2d 789 (N.C. 2002).)

"This ruling should give pause to people--especially to health care providers--who seek to hide misdeeds from public view by diverting them to arbitration," said John Vail of the Center for Constitutional Litigation (CCL) in Washington, D.C., which assisted local counsel in the case.

James Milon went to Duke Hospital for routine prostate surgery and emerged a paraplegic. He hired a lawyer and sued Duke for malpractice after formal mediation failed. Two weeks before filing suit, Milon visited his long-time doctor, whose practice Duke had recently acquired.

During the visit, Milon was given some "routine" paperwork to sign, including an "assignment of benefits" form, containing an arbitration agreement. His wife, Rosa, signed it with his name.

A couple of months after Milon filed the malpractice suit, Duke moved to compel arbitration, saying his wife had acted as his agent in signing the arbitration agreement.

The Milons argued that Rosa was not authorized to sign the form. The judge agreed with them and ordered the case to trial, but the court of appeals reversed in a 2-1 decision.

Judge Albert Thomas Jr. disagreed with his two colleagues. "Because Mrs. Milon did not have apparent authority to enter into an arbitration agreement on behalf of her husband, and because [the] defendants could not have reasonably and prudently relied on the arbitration form as signed by her, I respectfully dissent," he wrote. He noted that the trial court had found unequivocally "that there was no authority (apparent or otherwise) to bind Mr. Milon to a contract."

The Milons' lawyers--John Bugg and William Wolf of Durham, North Carolina, and Gayle Malone Jr. of Nashville, Tennessee--hired CCL to assist in the appeal to the state supreme court.

The center's brief argued that Rosa Milon did not have authority from her husband to sign the agreement and that she was not acting as his agent. "This case is about Mr. Milon's rights, rights which are individual to him and over which the law gives him, and only him, dominion," it said.

The brief concluded, "This court should reverse the decision of the court of appeals' majority, adopt the dissent, and affirm the decision of the trial court that 'there does not exist any valid or enforceable agreement between the parties that would require the arbitration of the plaintiffs' claims against the defendants.'"

Three weeks after oral arguments, the supreme court adopted Thomas's dissent, ruling in a one-sentence per curiam opinion that James Milon had not given his wife permission to sign the form and that Duke, which had "dealt with plaintiffs for years," could not reasonably believe that he had. The case is now headed for trial.

"The court did not condemn voluntary arbitration," Vail said. "It did, however, make clear that arbitration requires consent. Especially when unsophisticated parties are dealing with trusted health care providers, consent requires people's actual understanding of what they sign.

"It's not a broad ruling, but it does get rid of a horrible precedent," he said. "It means that when lawyers are litigating cases, they should be very careful to look at who waived the right to go to court. It's not something that anyone else can do for a person."