On January 23, 2012, Petitioner Christopher Wanken filed a writ of certiorari (Case Number 11-939) with the U.S. Supreme Court against Respondents Raymond James Financial Services, Inc. and its branch manager, John Dwight Wanken, seeking review of the Fifth Circuit decision on Wanken v. Wanken, No. 11-102219, 2011 U.S. App. LEXIS 20014 (5th Cir. Tex. Sept. 29, 2011). The questions presented are: Can a court affirm a district court’s sua sponte conversion of 12(b)(6) motions to summary judgment despite affidavits of unresolved issues of material fact? Can an appellate court act as a trier of fact in the absence of any evidence from the record to support its opinion? Can the court make its determination on statements made by a party regarding evidentiary documents never submitted to or reviewed by any court, including district court? Does the Court’s affirming a flawed lower court’s order deny due process? Does the affirming of a district court’s flawed order constitute countenance of fraud by the court and is it contrary to precedent and public policy? The Response is due on February 29, 2012. Stay tuned. Technorati Tags: ADR, law, arbitration

The United States Court of Appeals for the Fifth Circuit held that an agreement was illusory because the defendant retained the unilateral right to modify or terminate the arbitration provision at any time. In Carey v. 24 Hour Fitness, USA, Inc. No. 10-20845 (5th Cir. Jan. 25, 2012) John Carey (“Carey”) is a former sales representative for 24 Hour Fitness, USA, Inc. (“24 Hour Fitness”). During Carey’s period of employment, 24 Hour Fitness issued an employee handbook (the “Handbook”). The Handbook provided that all employment-related disputes would be “resolved only by an arbitrator through final and binding arbitration” under the the Federal Arbitration Act (“FAA”). It also specified that disputes under the Fair Labor Standards Act (“FLSA”) were among those subject to the mandatory arbitration policy and provided that disputes cannot be brought as class actions or in representative capacities. Carey signed the the Employee Handbook Receipt Acknowledgment (the “Acknowledgment”). The Acknowledgment also stated that the terms of the Handbook are subject to change (“Change-in-Terms Clause”): I acknowledge that, except for the at-will employment, 24 Hour Fitness has the right to revise, delete, and add to the employee handbook. Any such revisions to the handbook will be communicated through official written notices approved by the President and CEO of 24 Hour Fitness or their specified designee. No oral statements can change the provisions of the employee handbook. Carey’s employment ended and he filed the underlying class action against 24 Hour Fitness on allegations that it had violated the FLSA by failing to pay adequate compensation for overtime work. 24 Hour Fitness moved to compel arbitration pursuant to the dispute resolution clause contained in the Handbook. Carey argued that the arbitration agreement was illusory because 24 Hour Fitness retained the right to unilaterally amend the agreement. The District Court denied 24 Hour Fitness’ motion to stay and compel arbitration and 24 Hour Fitness appealed. The Fifth Circuit first highlighted the standard in determining whether the parties agreed to arbitrate: (1) whether there is a valid agreement to arbitrate; and (2) whether the dispute in question falls within the scope of that arbitration agreement. The Court said that courts apply ordinary state-law principles that govern the formation of contracts to determine whether there is a valid agreement to arbitrate. Under Texas law, an arbitration clause is illusory if one party can “avoid its promise to arbitrate by amending the provision or terminating it altogether.” In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010) (read more here). The Court found that the arbitration provision in 24 Hour Fitness’ Handbook was illusory because the Change-in-Terms Clause would have allowed 24 Hour Fitness to unilaterally avoid its promise to arbitrate by modifying the Handbook. Accordingly, the Fifth Circuit affirmed the District Court’s judgement. Technorati Tags: ADR, law, arbitration

by Holly Hayes This week, Medscape News posted an interview regarding physicians’ questions about ACOs (Accountable Care Organizations) with Anders M. Gilberg, senior vice president of Government Affairs, Medical Group Management Association (MGMA). The 15 questions and answers can be seen here. As the article points out, “The first voluntary ACO agreements will start on April 1 and July 1, 2012, and run for 3 years as part of the Medicare Shared Savings Program. To become an ACO participant, you may be a physician or other health professional in a group practice, a network of practices, or a partnership or joint venture with hospital. You might also participate in an ACO as an employee of a hospital.” Mr. Gilberg addresses areas of particular concern for physicians considering joining an ACO: 6. Are there aspects of ACOs that doctors need to be wary of or cautious about? Mr. Gilberg: Yes. For one, the fact that ACOs that provide a plurality of primary care services to a beneficiary are responsible for the cost of services regardless of whether they’re performed within the ACO network. That adds an element of uncertainty and risk to the program. Also, the fact that patients can opt out of sharing their health data within the ACO network poses potential problems for participating physicians. There’s a larger consideration for doctors, however. Because ACOs operate in part on a shared-savings model, they must be successful in reducing their fee-for-service costs to Medicare by certain prescribed percentages in order to benefit from the program. And even at this point, they will only receive 50 to 60 cents on the dollar, depending on their participation model. Now, if the formula for shared savings was simply limited to Part B or physician services, this would be a terrible financial deal. Doctors could very well end up as net losers, especially if they’ve incurred high start-up costs. But remember that shared savings are also calculated on Part A costs, whether expended within the ACO or outside of it. Because these are generally bigger cost drivers for Medicare than physician services, a physician-only or group practice-focused ACO that’s able to help reduce Part A costs can actually end up sharing savings with Medicare, even if in the process it does not reduce its own Part B fee-for-service costs to Medicare. One interesting financial scenario that physicians should consider is that ACOs may have to spend more on certain physician services in order to affect such matters as reducing expensive hospital emergency department visits and inpatient stays. To the extent that they can do this, doctor-led ACOs could very well end up benefiting both on the fee-for-service and the shared savings sides of the ledger. For ACOs that comprise both a physician group and an inpatient hospital, however, these calculations may become more difficult, because the hospital component will most likely find it necessary to make up for revenue that isn’t returned in the form of Medicare shared savings. See more of our ACO blogs here, here and here. We welcome your comments on the development of the ACO model. Holly Hayes is a mediator at Karl Bayer, Dispute Resolution Expert where she focuses on mediation of health care disputes. Holly holds a B.A. from Southern Methodist University and a Masters in Health Administration from Duke University. She can be reached at holly@karlbayer.com.

Following are this month’s recent developments in international arbitration law published by the International Law Office (free registration is required to view the articles): Brazil: Courting arbitration: specialised chamber decides first arbitration cases Canada: Stay denied where dispute fell under oral agreement and outside arbitration clause Greece: Appeal court considers law governing objective arbitrability Kenya: Aspects of arbitration proceedings Lithuania: Non-arbitrable public procurement disputes: on the right track? Switzerland: Third parties and arbitration clauses in promissor/promissee contracts Turkey: New code of obligations restricts arbitration in sales with instalment payments UK: Courts can enforce declaratory arbitral award Mexico: Can a government agency unilaterally nullify an arbitration agreement? UK: Courts can enforce declaratory arbitral award Canada: Ontario courts consider jurisdiction of NAFTA tribunals France: Supreme Court reiterates autonomy of the international arbitral legal order Technorati Tags: law, ADR, arbitration