The Western District of Texas has dismissed a case for lack of personal jurisdiction after holding an arbitration clause in a reseller agreement was illusory and unenforceable. In Dell Mktg., L.P. v. Incompass IT, Inc., No. A-10-CA-590-SS, (W.D. Tex., February 9, 2011), Incompass IT, Inc., a reseller of Dell Marketing, L.P. products, purchased items from Dell totaling more than $75,000 and allegedly failed to pay for the products. Dell sued Incompass in a Travis County, Texas court to collect on the debt. Incompass subsequently removed the case to the Western District of Texas and filed a motion to dismiss for lack of personal jurisdiction and improper venue. In order to determine the matter of personal jurisdiction, the Western District requested more information and allowed both parties to file supplemental memoranda. To establish personal jurisdiction over Incompass, Dell relied in part on an arbitration clause contained in the parties’ contract. According to U.S. District Judge Sam Sparks, Here, Dell has provided evidence of an arbitration agreement between Incompass and Dell providing that arbitration would take place in Austin, Texas and be governed by Texas law. . . . This agreement was incorporated by reference through a statement on the front of each invoice that read: “PLEASE REVIEW DELL’S TERMS & CONDITIONS OF SALE AND POLICIES AT www.dell.com/us/policy OR UPON REQUEST, WHICH GOVERN THIS TRANSACTION.” With regard to personal jurisdiction, Judge Sparks stated, The final contact, and the one most significant to the Court’s personal jurisdiction analysis, is the arbitration clause in the Reseller Agreement between Dell and Incompass. As noted above, personal jurisdiction is a defendant’s privilege and may be waived. This waiver can be express or implied. Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703 (1982). An agreement to arbitrate in a particular forum is one means by which a litigant can impliedly accept personal jurisdiction in that forum. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985); Ins. Corp. of Ireland, 456 U.S. at 703; PaineWebber, 260 F.3d at 461. The Court therefore concludes if Incompass agreed to arbitrate this dispute in Austin, Texas, and if the arbitration clause was valid, then Incompass impliedly consented to personal jurisdiction by this Court. According to the court, Under Texas law, the arbitration clause at issue in this case is illusory and therefore not legally binding. In Morrison v. Amway Corp., 517 F.3d 248 (5th Cir. 2008), the Fifth Circuit found an arbitration clause was illusory where there was “no express exemption of the arbitration provisions from Amway’s ability to unilaterally modify all rules, and the only express limitation on that unilateral right [was] published notice.” Morrison, 517 F.3d at 254. Here, those who contracted with Dell had to agree to terms and conditions that stated, in part: “These terms and conditions are subject to change at any time in Dell’s sole discretion without prior written notice.” See FAC, Ex. A at 43, 54, 66. Unlike in Morrison, in this case Dell did not even have to provide published notice of its unilateral modification of the arbitration clause. Thus, the argument for finding Dell’s arbitration clause illusory is even stronger in this case than in Morrison. Further, with respect to the arbitration clause in Morrison, the Fifth Circuit stated: “While it is inferable that an amendment thus unilaterally made by Amway to the arbitration provision would not become effective until published, there is nothing to suggest that once published the amendment would be inapplicable to disputes arising, or arising out of events occurring, before such publication.” Morrison, 517 F.3d at 254. Here, this Court was likewise unable to find language in the Reseller Agreement precluding amendment with retroactive effect. The possibility of such amendment at Dell’s sole discretion strengthens the Court’s conclusion the arbitration clause is illusory. After holding the arbitration clause in the parties’ contract was illusory and unenforceable pursuant to Texas law, the Western District of Texas dismissed the case without prejudice. Disputing discussed Morrison v. Amway when it was decided here. Technorati Tags: law, ADR, arbitration

The Northern District of Texas has ordered binding arbitration in an age and race dispute with an at-will employee where an arbitration policy was implemented several years after employment began and the employee continued working after receiving notice of the policy. In Robertson v. U-Haul Co. of Texas, No. 3:10-CV-2058-D, (N. D. Tex., February 7, 2011), John Robertson sued U-Haul Co. of Texas (“U-Haul”) “for age and race discrimination under the Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. § 621 et seq., and Title VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. § 2000e et seq.” Robertson began working for U-Haul in 1998. Eight years later, U-Haul adopted an arbitration policy for employment related disputes that also included termination (the “Arbitration Policy”). The Arbitration Policy provided for “mandatory, binding arbitration of disputes, for all employees,” and specifically applied “to disputes or claims brought under the ADEA and Title VII.” The policy also contained a provision which stated that an employee’s continued employment constituted an agreement to be bound by the terms of the Arbitration Policy and advised current employees to review the policy with a legal advisor. When the Arbitration Policy was implemented, U-Haul requested that all employees sign a copy and Robertson refused. In February 2008, Scott Graydon, U-Haul’s President, sent Roberson a letter, explaining that the Arbitration Policy was a condition of Robertson’s continued employment at U-Haul and that the Arbitration Policy bound Robertson, although he had, until then, declined to sign it. Robertson signed Graydon’s letter in confirmation of receipt. U-Haul terminated Robertson’s employment on September 26, 2009. In 2010, Robertson filed a demand for arbitration with the American Arbitration Association (“AAA”). Robertson’s arbitration claim was dismissed for failure to pay a filing fee. Robertson then filed suit in Texas State Court. U-Haul removed the case to the Northern District of Texas and filed a motion to abate the proceedings and to compel arbitration. The court began its opinion by stating there was no dispute regarding whether Robertson’s claims fell “within the scope of the Arbitration Policy.” Additionally, Robertson made no argument that his claims were not arbitrable. According to the court, The parties instead dispute whether the Arbitration Policy is valid. Under the FAA, arbitration agreements that are valid under general principles of state contract law and involve interstate commerce are “valid, irrevocable, and enforceable.” 9 U.S.C. § 2. The parties do not dispute that the contract involves interstate commerce. The dispositive question is whether the Arbitration Policy is valid under Texas law. The district court began its inquiry by reviewing the applicable Texas law, “The enforceability of an arbitration agreement is a question of law.” In re Dillard Dep’t Stores, Inc., 198 S.W.3d 778, 781 (Tex. 2006) (per curiam) (citing J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003)). “An employer may enforce an arbitration agreement entered into during an at-will employment relationship if the employer establishes that the employee received notice of its arbitration policy and accepted it.” Id. (citing In re Halliburton Co., 80 S.W.3d 566, 568 (Tex. 2002)). “Notice is effective if it unequivocally communicates to the employee definite changes in the employment terms.” Id. (citing In re Halliburton Co., 80 S.W.3d at 568). “If the employee receives notice and continues working with knowledge of the modified employment terms, the employee accepts them as a matter of law.” Id. (citing Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 229 (Tex. 1986)). Next, the Northern District held that the Arbitration Policy was “enforceable and applicable to Robertson’s claims,” because “Robertson received proper notice of the Arbitration Policy,” and U-Haul “established that Robertson continued working for U-Haul with knowledge of the modified employment terms.” According to the court, Robertson continued to work for U-Haul until 2009, more than three years after U-Haul notified him that it had modified the terms of his at-will employment. His continued employment constituted acceptance of U-Haul’s Arbitration Policy, and he is bound to arbitrate his current claims because they fall within the scope of the Arbitration Policy. The Northern District of Texas granted U-Haul’s motion to abate and ordered the dispute to binding arbitration. Technorati Tags: law, ADR, arbitration

by Holly Hayes The U.S. Department of Defense has published an on-line Professional Conduct Toolkit designed to help put a stop to disruptive behaviors in healthcare that “undermine team effectiveness, contribute to unhealthy work environments, and put patients at risk.” The toolkit consists of four modules: Professional Conduct, Teamwork, and Patient Safety Responding to Behaviors that Undermine Safe Patient Care Supporting engagement: The Role of Leaders and System Responses High-Conflict Personalities, Mental Health Issues, and Safety Considerations The Toolkit also contains tipsheets, a checklist and tools and guides for implementing initiatives within your healthcare organization. Please share any information you have about addressing disruptive behavior in healthcare with us and our readers. Technorati Tags: Mediation 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.

Sen. Sheldon Whitehouse (D – Rhode Island) has introduced legislation that would provide bankruptcy court judges with the option to require homeowners undergoing bankruptcy and their lenders to engage in foreclosure mediation. According to DS News magazine, Whitehouse’s proposal is modeled after a court program in his home state of Rhode Island. He says it would not give judges the power to slash mortgage debt like the many bankruptcy cramdown measures that have fallen short, but instead would force lenders to open up the lines of communication to find a solution that is in the best interest of both homeowners and investors. Whitehouse’s bill — Limiting Investor and Homeowner Loss in Foreclosure Act (S. 222) — was referred to the Senate Judiciary Committee, of which he is a member, last week. The full committee held a hearing Tuesday on bankruptcy court foreclosure mediation programs and how the approach might be used to “cut through the red tape” and bring the homeowner and their mortgage company together “for a good faith negotiation,” according to Whitehouse. The entire article may be read here. For a list of foreclosure mediation programs across the nation, see the National Consumer Law Center‘s Foreclosure Mediation Programs by State. Additionally, foreclosure mediation bills are currently before the legislature in South Carolina and Washington state. Disputing previously discussed foreclosure mediation programs operated in Hawaii, Connecticut, Florida, Nevada and the District of Columbia. Technorati Tags: ADR, law, mediation