Joseph Osefchen of DeNittis Osefchen on April 22, 2016 obtained a landmark ruling which resulted in the New Jersey Superior Court of New Jersey, Appellate Division rejecting a mandatory arbitration clause in a patient’s bid to obtain medical records.  A New Jersey appeals court on Friday affirmed that a hospital’s medical records processor couldn’t enforce a mandatory class action waiver arbitration clause included in an invoice to a patient’s attorney seeking the client’s medical records, saying the processor had a pre-existing legal duty to produce the records.

Medical Records Online Inc., a third-party processor of requests for medical records submitted to hospitals and physicians, lost its challenge of a trial court order denying its motion to compel arbitration in a putative class action dispute over charges on its invoice with Bernetich Hatzell & Pascu LLC, a New Jersey-based law firm that was authorized to obtain medical records for a prospective client.

MRO, which was asked to retrieve medical records from Kennedy Memorial Hospitals for the firm’s potential client, has held that the dispute should be compelled to arbitration because the invoice, which was paid by the firm before it initiated litigation against the processor, contained a provision that arbitration would be enforced if a dispute were to arise over the charges.

But the three-judge panel said that under New Jersey law, Bernetich Hatzell had a statutory right to the records for a cost-based fee and the alleged agreement between the two sides therefore lacked consideration — a contract principle that both sides must “get something” out of the exchange. Therefore, MRO did not promise the firm anything it was not already obliged to provide, the judges found.

“In this case, MRO’s pre-existing duty arises from statute and regulation, as opposed to contract,” the court said. “As the records processor for Kennedy Hospitals, MRO was obliged to provide medical records upon the request of ‘a patient or the patient’s legally authorized representative’ or anyone else whom the patient has authorized.” The court also rejected the processor’s argument that even if it had no contractual right to compel arbitration, Bernetich Hatzell surrendered any right to object because it paid the invoiced amount, rather than presenting its dispute prior to payment. The judges said that even if one assumes the firm fully understood that MRO intended to secure its nonobjection by payment, there was nothing “voluntary” about the choice presented because MRO demanded prepayment before releasing the records, creating a dilemma for the patient.

“The purported waiver was the product of a threat to withhold the requested medical records for an indeterminate period of time while the dispute was referred to arbitration,” the court said. “Thus, BH&P’s payment of the fee does not constitute an enforceable waiver of the right to object to the arbitration provision that MRO unilaterally imposed.”

The case is a published opinion which is attached.  Court of Appeal Opinion