The Southern District of Texas has confirmed a foreign arbitration award despite that fraud was alleged because the public policy defense specified in the New York Convention does not preclude confirmation of a foreign arbitral award where the party arguing against confirmation also allegedly participated in the fraud. In Tamimi Global Co. v. Kellogg Brown & Root LLC, No. H-11-0585, (S.D. Tex., March 24, 2011), the United States of America awarded Kellogg Brown and Root (“KBR”) a contract to provide dining facility services during military operations in Iraq. In June 2003, KBR entered into a Master Agreement sub-contract with Tamimi to provide food services at Camp Anaconda. The Master Agreement contained an arbitration clause which stated the London Court of International Arbitration (“LCIA”) would resolve any disputes which arose out of the Master Agreement. After KBR entered into the Master Agreement with Tamimi, a disagreement arose between the US and KBR. The US began withholding monetary payments as a result of this dispute. KBR then withheld payment of approximately $35 million from Tamimi, arguing KBR was not required to pay Tamimi until it received payment from the US. In May 2010, KBR and Tamimi began an arbitration proceeding before the LCIA and a final award in favor of Tamimi was issued in December 2010. The award required that KBR pay Tamimi the $35 million Tamimi was owed under the Master Agreement plus 4% interest and well as legal fees plus 4% interest. Tamimi filed a Petition to Confirm Foreign Arbitration Award and KBR filed a response opposing the petition and a Motion to Stay Proceedings pending resolution of the underlying dispute between KBR and the US which was then being litigated in the United States Court of Claims. In support of its position, KBR alleged it was against public policy under the New York Convention to confirm an arbitration award when the underlying agreement which contained the arbitration agreement was obtained through fraud. KBR relied completely on a filing from the company’s ongoing dispute with the US which alleged KBR’s head of food services in Iraq and Kuwait, along with his deputy, received kickbacks from Tamimi in return for influencing KBR’s decision to award the sub-contract to Tamimi. The US further alleged that senior personnel at KBR, including the head of procurement and the head of dining services contracts, were made aware of irregularities related to the Master Agreement, but took no action. Because KBR’s argument that the Master Agreement was obtained through fraud rested entirely upon allegations made by the US in the Court of Claims proceeding, and KBR was an alleged participant in the fraud, the Southern District held, Enforcement of an arbitration award or other judgment in favor of one party alleged to have committed fraud against the other party allegedly engaged in the same fraudulent misconduct does not violate the most basic notions of morality and justice. Next, the Southern District of Texas addressed KBR’s allegations that the LCIA’s award of interest was against Texas public policy. According to the court, the agreement provided for interest and arbitration awards must normally be enforced as written. KBR’s reliance on a case which refused to impose interest in an arbitration award was misplaced because in that case the arbitral award did provide for interest. Instead, a party sought to have the court add interest when it confirmed the arbitration award. According to the Southern District of Texas, In the case before this Court, the arbitration panel awarded interest, indeed, interest that was provided for by the governing arbitral rules, and it would be inappropriate to modify the Arbitration Award to eliminate the interest portion of the Award. The court stated, None of the seven grounds specified in the New York Convention, more particularly, the public policy defense, precludes confirmation of the Arbitration Award in this case. Public policy favors confirmation of foreign arbitration awards. The allegations of fraud by both KBR and Tamimi, even if proven by the United States in the Court of Claims proceeding, do not support denial of confirmation of the Arbitration Award on public policy grounds. Tamimi’s Petition to Confirm Foreign Arbitration Award was granted and KBR’s Motion to Stay was denied. Disputing would like to thank Charles Rumbaugh for alerting us to this case. Technorati Tags: arbitration, ADR, law

by Holly Hayes According to Healthcare.gov, Medicaid Services (CMS) has committed up to $500 million to examine different models for improving patient care and engagement as well as collaboration with patients to reduce hospital-acquired conditions and improve transition of patients between care providers. The initiative called: Partnership for Patients: Better Care, Lower Costs is a new public-private partnership designed to “help improve the quality, safety and affordability of health care for all Americans”. The Partnership for Patients brings together leaders of major hospitals, employers, health plans, physicians, nurses, and patient advocates along with State and Federal governments in a shared effort to make hospital care safer, more reliable, and less costly. The Partnership will help save 60,000 lives by stopping millions of preventable injuries and complications in patient care over the next three years and has the potential to save up to $35 billion, including up to $10 billion for Medicare. Over the next ten years, it could reduce costs to Medicare by about $50 billion and result in billions more in Medicaid savings. Already, more than 500 hospitals, as well as physicians and nurses groups, consumer groups, and employers, have pledged their commitment to the new initiative. The two goals of this new partnership are: Keep patients from getting injured or sicker. By the end of 2013, preventable hospital-acquired conditions would decrease by 40% compared to 2010. Achieving this goal would mean approximately 1.8 million fewer injuries to patients, with more than 60,000 lives saved over the next three years. Help patients heal without complication. By the end of 2013, preventable complications during a transition from one care setting to another would be decreased so that all hospital readmissions would be reduced by 20% compared to 2010. Achieving this goal would mean more than 1.6 million patients will recover from illness without suffering a preventable complication requiring re-hospitalization within 30 days of discharge. By 2015, a portion of Medicare payments to the majority of hospitals will be linked to whether hospitals are delivering safer care, using information technology effectively and meeting patient needs. Please let us know your thoughts about this new initiative and how collaboration among caregivers, patients and families can improve patient safety and reduce costs. Technorati Tags: Healthcare 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.

Disputing would like to thank Don Philbin for alerting us to the recent publication of Fulbright & Jaworski, LLP’s 2011 International Arbitration Report, Issue 1. According to the firm’s website, Issue 1 topics include: Section 1782 Update The State of Necessity Defense in Investor-State Arbitration The Compatibility of EU Law with Bilateral Investment Treaties between EU States New Arbitration Law Passed in Hong Kong A complimentary copy of the publication may be downloaded here. Hard copies may be requested by email. Technorati Tags: law, ADR, arbitration

Yesterday, the Texas Senate passed a bill which seeks to establish a Texas Institute of Health Care Quality and Efficiency. Senate Bill 8 was authored by State Senator Jane Nelson and filed on February 16, 2011. The bill was referred to the Senate Committee on Health and Human Services the next day and a public hearing was held on March 29th. SB 8 seeks “to improve health care quality, accountability, and cost containment in this state by encouraging health care provider collaboration, effective health care delivery models, and coordination of health care services.” The full text of the bill is available here. A companion bill, SB 7, was also passed Tuesday. It relates “to strategies for and improvements in quality of health care provided through and care management in the child health plan and medical assistance programs designed to achieve healthy outcomes and efficiency.” The bills will now move to the Texas House of Representatives. You may monitor these and other bills as they move through the Texas Legislature here. The last day of the regular Texas legislative session will be Monday, May 30, 2011. Disputing previously discussed SB 8 here and here. Technorati Tags: Healthcare, Texas Legislation