December 12, 2007
FORT LEE SURGERY CENTER, INC. A/S/O BRENT KEYS, PLAINTIFF-RESPONDENT,
PROFORMANCE INSURANCE COMPANY, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-4920-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued November 26, 2007
Before Judges C.S. Fisher and C.L. Miniman.
In this appeal, we consider, among other things, whether N.J.S.A. 2A:23A-18(b) precludes appellate review of a trial judge's modification of an arbitrator's award. We conclude that we may exercise supervisory jurisdiction here because of our doubts about whether the trial judge confined her decision to the grounds for modification delineated in N.J.S.A. 2A:23A-13(c).
The record reveals that as a result of injuries sustained in a motor vehicle accident, Brent Keys underwent a series of lumbosacral epidural steroid and trigger point injections at the facilities of plaintiff Fort Lee Surgery Center. Defendant Proformance Insurance Company claimed this treatment was not medically necessary and declined payment of Fort Lee's bills. As a result, Fort Lee demanded that the matter be arbitrated, as was its right.
A hearing was conducted, following which the arbitrator rendered a written decision that contained his reasons for denying Fort Lee's claim. The arbitrator concluded, based upon the reports of three physicians, that the treatment in question did not meet the standards of medical necessity contained in N.J.S.A. 39:6A-2(m) and N.J.A.C. 11:3-4.2. The arbitrator also rejected Fort Lee's contention that prior arbitration awards rendered in Keys's favor prevented Proformance from relitigating the issue of medical necessity.
Fort Lee filed in the Law Division a verified complaint, which sought the court's review of the arbitrator's decision. This complaint was based on N.J.S.A. 2A:23A-13, which empowers a superior court judge to summarily determine whether to modify or correct an award issued by an arbitrator pursuant to the Alternative Procedure for Dispute Resolution Act (APDRA), N.J.S.A. 2A:23A-1 to -30.
On the return date of an order to show cause entered at the commencement of this action, the trial judge stated in a brief oral decision that she agreed with Fort Lee's principal argument that the arbitrator's decision "is truly one that is unfair." Specifically, the judge agreed with Fort Lee that Proformance should have been estopped from contesting whether the expenses in question were medically necessary; she also held that the arbitrator's decision was not supported "by proper and substantial evidence." For completeness, we quote the judge's entire decision:
The court has carefully considered the arguments of counsel, the briefs and the cases that were submitted here with respect to this motion.
I would indicate that yes, equitable principles do apply as far as the court can determine based on that which has been presented. The simple facts are as counsel, both counsel have stated it. The arbitration -- one of the initial arbitration awards involved the denial of coverage, PIP coverage to Mr. Keys. Mr. Keys filed for the arbitration and that resulted in an award that Mr. Keys had not been uncooperative and that thereafter the medical expenses of Neurology and Pain Management for all the services or at least for the doctor's services were paid.
The principal argument here by the plaintiff is that the result here is truly one that is unfair. Of course both counsel are arguing to the court that there's --there is unfairness present.
The company itself, Proformance, after the arbitrator's award decided to pay the doctor's bills. That was their business decision as I take it but the counsel for Fort Lee says that the result of the arbitrator's findings was that the coverage was in place and thus the bills should be paid. There is to be no bar to the payment after the finding of coverage and I agree with that which has been presented by the plaintiff here.
That finding I find resulted in effect in the fact that all bills should have been paid with respect to the medical expenses of Neurology and Pain Management including the facility payments.
I say that certainly under the theory of the entire controversy doctrine that there should have been [de]barment of these -- of this medical necessity issue. That came later on, much later on as we know based on that which has been submitted to the court and also I agree with plaintiff's counsel that the record before the arbitrator was not supported by proper and substantial evidence. The way it came in as has been explained to me by both counsel, was a statement from those three doctors referring to the evidence that had already been presented and looked at from a primary standpoint by the doctors and it is for that reason that this court finds that what would result in an unjust result should not be allowed and therefore for all those reasons I am granting the motion of [Fort Lee].
Following the entry of a final order memorializing this decision, Proformance filed an appeal with this court.
Whether we have jurisdiction to hear this appeal turns on the meaning of N.J.S.A. 2A:23A-18(b), which states:
Upon the granting of an order confirming, modifying or correcting an award, a judgment or decree shall be entered by the court in conformity therewith and be enforced as any other judgment or decree. There shall be no further appeal or review of the judgment or decree.
Fort Lee argues that this statute precludes our review of the trial judge's decision.
This argument is not novel. In considering the scope of N.J.S.A. 2A:23A-18(b), the Supreme Court held in Mt. Hope Dev. Assoc. v. Mt. Hope Waterpower Project L.P., 154 N.J. 141, 152 (1993) that there are exceptions to the Legislature's declaration, in N.J.S.A. 2A:23A-18(b), that "[t]here shall be no further appeal or review" of a judgment that modifies or corrects an arbitration award. For example, the Court held that APDRA's general elimination of appellate jurisdiction does not apply to child support orders or awards of counsel fees. Ibid. The Court also recognized that there may be other circumstances "where public policy would require appellate court review." Ibid.
In a matter decided last month, we recognized that the Supreme Court also recognized the availability of appellate review when "necessary for it to carry out 'its supervisory function over the courts.'" Morel v. State Farm Ins. Co., __ N.J. Super. __, __ (App. Div. 2007) (slip opinion at 6) (quoting Mt. Hope, supra, 154 N.J. at 152). In speaking for the court in Morel, Judge Coburn explained that the existence of this "supervisory function" permits our exercise of appellate jurisdiction when a trial court has exceeded its jurisdiction:
Plaintiff was entitled to a ruling applying the relevant statutory standards. Had the judge made such a ruling, the proper course would be dismissal of the appeal under N.J.S.A. 2A:23A-18. But the statutory denial of a right to appeal in this court is based on the assumption that the trial judge will decide the case by applying the principles dictated by the Legislature. When a judge fails to carry out that legislative direction, as occurred here, our supervisory role requires consideration of the appeal and reversal and remand for application of the statutory standards. Otherwise, the statute would be rendered meaningless. [__ N.J. Super. at __ (slip opinion at 6.]
We adhere to this sensible view of the scope of N.J.S.A. 2A:23A-18(b), and likewise conclude that we are not precluded by that statute from providing a remedy when a trial judge has failed to limit review of an arbitration award to the grounds set forth in N.J.S.A. 2A:23A-13.
N.J.S.A. 2A:23A-13(c) defines the scope of the trial judge's jurisdiction. On the application of a party to the arbitration, a trial judge may modify or correct an award upon finding that the rights of that party were prejudiced by:
(1) Corruption, fraud or misconduct in procuring the award;
(2) Partiality of an umpire appointed as a neutral;
(3) In making the award, the umpire's exceeding their power or so imperfectly executing that power that a final and definite award was not made;
(4) Failure to follow the procedures set forth in this act, unless the party applying to vacate the award continued with the proceeding with notice of the defect and without objection; or
(5) The umpire's committing prejudicial error by erroneously applying law to the issues and facts presented for alternative resolution. [Ibid.]
The first four subsections of N.J.S.A. 2A:23A-13(c) have no application here. Fort Lee's attack on the arbitration award, by law, was necessarily confined to whether the arbitrator had "committ[ed] prejudicial error by erroneously applying law to the issues and facts presented for alternative resolution."
N.J.S.A. 2A:23A-13(c)(5). Recognizing this limitation, Fort Lee specifically argued in the trial court that the arbitrator committed prejudicial error (1) by not applying the doctrine of collateral estoppel to bar relitigation of the issue of medical necessity; (2) by allowing the record to remain open after the hearing in violation of the rules governing arbitration; and (3) by disregarding relevant evidence and the substantive law regarding the issue of medical necessity. With regard to this third aspect, Fort Lee asserted that the arbitrator disregarded Keys's testimony that he significantly improved after the treatment in question.
The judge expressed in conclusory fashion her decision in favor of Fort Lee on its first and third contentions.*fn1 She found that the doctrine of collateral estoppel should have been applied to bar Proformance's position that the services rendered were not medically necessary. And she also appears to have concluded that the arbitrator should not have relied upon the opinions of three medical experts in concluding that the treatments in question were not medically necessary.
In considering whether the trial judge exceeded the parameters of N.J.S.A. 2A:23A-13(c)(5), we start with the premise that a judge is not permitted to modify an arbitrator's decision because, if presented with the same facts, the judge would have decided the matter differently. Instead, a judge must canvass the existing factual record and determine whether the arbitrator's decision manifests an erroneous application of the law to the arbitrator's findings of fact. Even then, not every erroneous application of the law, but only those that may be labeled "prejudicial," permit a modification or correction of an arbitration award. Our careful review of the trial judge's oral decision does not satisfy us that she applied this standard or limited herself to the grounds for modification contained in N.J.S.A. 2A:23A-13(c)(5).
As for the contention that Proformance should have been collaterally estopped, we observe that the arbitrator found that the prior awards involving Keys and Proformance did not contain an adjudication of Proformance's claim that the treatments in question were not medically necessary. Certainly, the judge was correct that collateral estoppel could apply in this context. See Konieczny v. Micciche, 305 N.J. Super. 375 (App. Div. 1997). The arbitrator did not hold otherwise but, instead, concluded that the prior arbitration awards did not compel the application of collateral estoppel. That is, the arbitrator held that the prior awards related to issues "of policy coverage and eligibility for medical benefits" and that "none of the prior awards relied upon by [Fort Lee] herein relate to, in any way, the issue of the medical necessity of the pain management treatment provided [Keys] herein." On its face, the arbitrator's determination would appear to conform to the general notion that whether further litigation should be barred turns on whether the party to be estopped "has had his day in court on an issue." McAndrew v. Mularchuk, 38 N.J. 156, 161 (1962). The arbitrator essentially concluded that medical necessity had not been previously litigated and that it was appropriate to consider the parties' contentions on their merits. Because the arbitrator clearly applied the correct legal standard, the trial judge's authority to modify turned on whether the arbitrator's application of that standard was fundamentally unsound or prejudicially mischaracterized the nature and content of the prior awards. It is not clear to us whether the judge so limited her review of that aspect of the arbitrator's decision.
As for the arbitrator's decision on the merits, we observe that he correctly relied upon the definitions of medical necessity contained in N.J.S.A. 39:6A-2(m)*fn2 and N.J.A.C. 11:3-4.2,*fn3 and -- with reference to these definitions -- concluded, based upon his own view of the medical experts and the evidence before him, that the treatment in question was not medically necessary. Absent a finding of a specific material error in the arbitrator's application of this standard against his findings of fact -- which facts he was entitled to find, weigh and interpret based on his own expertise -- the judge was not empowered to replace the arbitrator's findings with her own. The trial judge's oral decision does not definitively demonstrate whether she exceeded her authority in this regard and, as a result, we are entitled to exercise supervisory appellate jurisdiction.
Like our colleagues in Morel, we conclude that we have supervisory jurisdiction to ensure that an arbitrator's award is modified or corrected by a trial judge only for the reasons contained in N.J.S.A. 2A:23A-13. Here, the trial judge's summary decision could be interpreted as exceeding her authority. We thus vacate the order under review and remand to the trial judge for reconsideration of the matter in conformity with the standard expressed in N.J.S.A. 2A:23A-13(c)(5).
In reconsidering the matter, the trial judge should ascertain whether the arbitrator committed prejudicial error by refusing to apply the doctrine of collateral estoppel to the facts at hand or whether the arbitrator prejudicially misapplied the standards of medical necessity to the facts that he was entitled to find. In carefully analyzing the matter in this context, the judge must defer to any findings of fact that are supported by the record, as well as the arbitrator's expertise in weighing the significance of those facts against the applicable legal standards of medical necessity. If, in so deferring, the judge concludes that the arbitrator nevertheless committed prejudicial error of the type defined in N.J.S.A. 2A:23A-13(c)(5), then, as required by N.J.S.A. 2A:23A-13(f), she must "appropriately set forth the applicable law and arrive at an appropriate determination under the applicable facts" determined by the arbitrator before "confirm[ing] the award as modified."
For these reasons, the order under review is vacated and the matter remanded for further proceedings in conformity with this opinion. We do not retain jurisdiction.