Epstein v. Vision Service PlanAnnotate this Case
Epstein, an optometrist, entered into a VSP “Network Doctor Agreement.” VSP audited of Epstein’s claims for reimbursement, concluded he was knowingly purchasing lenses from an unapproved supplier, and terminated the provider agreement. The agreement included a two-step dispute resolution procedure: the “Fair Hearing” step provided for an internal “VSP Peer Review.” If the dispute remained unresolved, the agreement required binding arbitration under the Federal Arbitration Act (FAA), under procedures set forth in the policy. A “Fair Hearing” panel upheld the termination.
Instead of invoking the arbitration provision, Epstein filed an administrative mandamus proceeding, alleging the second step of the process was contrary to California law requiring certain network provider contracts to include a procedure for prompt resolution of disputes and expressly stating arbitration “shall not be deemed” such a mechanism. (28 Cal. Code Regs 1300.71.38.) He claimed that state law was not preempted by the FAA, citing the McCarran-Ferguson Act, which generally exempts from federal law, state laws enacted to regulate the business of insurance.
The court of appeal affirmed the rejection of those challenges. State regulatory law requiring certain network provider agreements to include a dispute resolution process that is not arbitration pertains only to the first step of the dispute resolution process and does not foreclose the parties from agreeing to arbitration in lieu of subsequent judicial review. While the arbitration provision is procedurally unconscionable in minor respects, Epstein failed to establish that it is substantively unconscionable.