The Eastern District of Texas has refused to grant a jointly filed motion for vacatur despite that provisions of the parties’ mandatory mediation settlement agreement required vacatur of portions of the court’s earlier judgment. In Ohio Willow Wood Co. v. Thermo-Ply, Inc., No. 9:07-CV-274, (E. D. Tex., February 3, 2011), the Ohio Willow Wood Company (“OWW”) filed a lawsuit against Thermo-Ply, Inc. for alleged infringement of its patent, United States Patent No. 7,291,182 (“the ‘182 patent”), which was also in the process of being reexamined by the U.S. Patent and Trade Office. Thermo-Ply filed a motion for summary judgment based on obviousness of the claims in the patent. The Eastern District of Texas granted Thermo-Ply’s motion and entered Final Judgment. Both parties appealed. The parties were ordered to mandatory mediation and reached a settlement agreement that required vacatur of portions of the Eastern District’s Final Judgment, including those portions “that rendered much of the ‘182 patent invalid.” The case was then remanded to the Eastern District of Texas in order to determine “whether its invalidity judgment should be vacated.” On remand, two additional parties also involved in a ‘182 patent dispute with OWW moved to intervene. First, the Eastern District of Texas analyzed United States Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18, 115 S. Ct. 386 (1994), The Court stated that the “principal condition to which we have looked [in determining whether vacateur is appropriate] is whether the party seeking relief from the judgment below caused the mootness by voluntary action.” Id. at 24, 115 S. Ct. at 391. While exceptional circumstances can justify vacateur, “those exceptional circumstances do not include the mere fact that the settlement agreement provides for vacateur.” Id. at 29, 115 S. Ct. at 393. However, the Bancorp Court was very clear that it was not announcing a rule that “vacateur can never be granted when mootness is produced” by way of settlement agreement, id., and the court’s decision in this case should not be interpreted otherwise. Additionally, the Court was not addressing the policy considerations which have resulted in the development of mandatory mediation programs. The court continued its analysis by stating, In the present case the Federal Circuit placed OWW and Thermo-Ply in the mandatory mediation program. According to the Appellate Mediation Program Guidelines, “[t]he purpose of mediation is a settlement of the case. This may include a global settlement.” United States Court of Appeals for the Federal Circuit, Appellate Mediation Program Guidelines at 4 (emphasis added); see also id. at 6 (“The purpose of the mediation program is to help the parties achieve settlement.”). According to the court, Given the emphasis placed on alternative dispute resolution by Congress and the judiciary, a per se rule barring vacateur as part of the appellate mediator’s “tool box” seems short sighted. A more reasoned approach is to examine, on a case-by-case basis, the policy considerations and factors addressed in Bancorp and decisions that followed. Next, the Eastern District discussed several factors in its vacatur analysis, In addition to consideration of whether the parties have caused mootness by voluntary action, other factors considered by these courts include: the parties’ desire to avoid any potential preclusive effect; the parties’ interest in conserving their resources; the public interest in the orderly operation of the federal judicial system; and the potential to conserve judicial resources. The court concluded by stating, The invalidity judgment in this case did not require extensive time from this court, and did not require lengthy service from jurors. Given the value the judicial system places on mediation, a vacateur that affected only OWW and Thermo-Ply, saved the Federal Circuit from hearing the appeal, and finally disposed of the dispute could be justified. But this patent is the subject of litigation in other courts, and is involved in reexamination. The judgment of invalidity is now ripe for consideration by the Circuit Court. Vacating the judgment will impose costs on other parties and courts. It will only delay, not obviate the need for, consideration of the issue by the Federal Circuit. The court concludes that this is not a case where the circumstances justify vacating its summary judgment order that many of claims of the ‘182 patent are invalid as obvious. The Eastern District of Texas denied the parties’ joint motion to vacate the court’s earlier judgment. Technorati Tags: Mediation

Michael H. LeRoy, Professor of Labor and Industrial Relations and Law at the University of Illinois College of Law, recently published a law review article entitled Are Arbitrators Above the Law? The ‘Manifest Disregard of the Law’ Standard, Boston College Law Review, Vol. 52, No. 1, p. 137, 2011; Illinois Program in Law, Behavior and Social Science Paper. In his article, Professor LeRoy examines the effect Hall Street Associates v. Mattel, Inc., 552 U.S. 576 (2008), has had on the “manifest disregard of the law” standard across federal Circuit Courts. Here is the abstract: Arbitration is supposed to be final and binding. But federal and state laws, and judicial doctrines, allow courts to vacate arbitrator awards. This study contemplates the role of courts when they review awards that “manifestly disregard the law” – a term that means the arbitrator knew the law but chose to ignore it. Given the norm of arbitral finality, should courts vacate these rulings? Hall Street Associates v. Mattel, Inc., 552 U.S. 576 (2008), failed to answer this question. The parties asked a court to review their award for errors of law. This standard is not in the Federal Arbitration Act (FAA). Hall Street ruled that courts cannot review awards beyond the FAA’s express terms. The parties’ standard prompted Hall Street to ask whether courts may apply “manifest disregard of the law,” even though it is not in the FAA. Inscrutably, Hall Street answered: “Maybe the term ‘manifest disregard’ was meant to name a new ground for review, but maybe it merely referred to the [FAA’s] § 10 grounds collectively, rather than adding to them.” I analyze “manifest disregard” by using historical and empirical methods. Common law courts vacated awards for “fraud,” “corruption,” “partiality,” or if arbitrators “exceeded powers.” The FAA enumerates these as grounds to vacate awards. In the same sequence with these terms, nineteenth century courts vacated awards for “manifest mistake” or “palpable mistake” of the law. I contend that Congress inadvertently omitted “manifest disregard” from the FAA. To answer Hall Street’s equivocation: “Manifest disregard of the law” is part of the FAA. This sets the stage for my empirical question: Has Hall Street led courts to confirm more awards, thus promoting finality? The answer is yes. In 46.4% of federal cases and 21.8% of state cases, parties in my database argued that an award manifestly disregarded the law. Still, state appellate courts confirmed more employment awards after Hall Street was decided on March 3, 2008 – 88.9% (16/18), compared to 70.9% (73/103) from 1975 until Hall Street. Federal district courts confirmed 93.7% of awards (164/175) before Hall Street, and 90.9% (30/33) after. Federal appeals courts confirmed awards at a high rate before and after Hall Street (87.8% and 85.7%). Unfortunately, Hall Street’s muddled analysis has split federal circuits. The Fifth and Eleventh Circuits ruled that Hall Street ended “manifest disregard,” but the Second, Sixth, and Ninth Circuits still treat it as part of the FAA. The First, Third, Fourth, and Tenth Circuits avoided ruling on the standard. In addition, state courts have differed in their reactions to Hall Street. This fractured approach implies that the Supreme Court may reconsider its vague treatment of “manifest disregard.” The Court should affirm this standard. My findings show that review for “manifest disregard” does not erode finality. The standard translates to nanoscale review of awards. As one court put it: “There is…a way to understand ‘manifest disregard of the law’ that preserves the established relation between court and arbitrator…It is this: an arbitrator may not direct the parties to violate the law.” Judges have applied this concept for two centuries to ensure that private tribunals conform to the laws. This rationale is particularly relevant because so much arbitration has changed from a voluntary to mandatory process. Judicial review must be allowed to correct an arbitrator’s intentional flouting of the law. If “manifest disregard” is eliminated, arbitral finality will rise above the crowning principle of the American constitutional system: “No man in this country is so high that he is above the law.” (U.S. v. Lee, 106 U.S. 196, 220 (1882)). The article may be downloaded (without charge) from Social Science Research Network. What are your thoughts? Technorati Tags: law, ADR, arbitration, manifest disregard of the law

Last Thursday, the Texas Supreme Court heard oral argument in CMH Homes, Inc. et al. v. Perez, No. 10-0688. At issue in this case of first impression is an interlocutory appeal from an arbitration order filed pursuant to Section 51.016 of the Texas Civil Practice and Remedies Code. Section 51.016 is a recent addition to Code and became effective on September 1, 2009. Section 51.016 states: Sec. 51.016. APPEAL ARISING UNDER FEDERAL ARBITRATION ACT. In a matter subject to the Federal Arbitration Act (9 U.S.C. Section 1 et seq.), a person may take an appeal or writ of error to the court of appeals from the judgment or interlocutory order of a district court, county court at law, or county court under the same circumstances that an appeal from a federal district court’s order or decision would be permitted by 9 U.S.C. Section 16. CMH Homes filed a petition for review with the Supreme Court of Texas after the San Antonio Appeals Court dismissed the company’s interlocutory appeal for lack of jurisdiction (No. 04-10-00259-CV). A video webcast of the oral argument is currently available for download through St. Mary’s University School of Law. Once available, the Supreme Court of Texas will post audio transcripts of the oral argument here. Last month, Disputing discussed CMH Homes, Inc. in more detail here. Technorati Tags: ADR, law, arbitration, Texas Supreme Court

by Holly Hayes After voting to repeal national health reform law on January 19th, House Republicans introduced medical liability reform legislation that would cap damage awards. The Help Efficient, Accessible, Low-cost, Timely Health Care (HEALTH) Act of 2011 “would limit noneconomic damages to $250,000, and punitive damages to the greater of $250,000 or twice the amount of economic damages. It would not preempt state laws that establish higher or lower damage limits.” Read more here. Bill sponsor, Rep. Phil Gingrey, MD (R, Ga.), an obstetrician-gynecologist, said the legislation would reduce defensive medicine and save billions of taxpayer dollars. American Medical News provided additional details about the legislation: The HEALTH Act also would set a statute of limitations on filing health care lawsuits of one year after a patient discovers — or should have discovered — an injury, or three years after the injury, whichever occurs first. The bill is modeled on liability reforms that have been on the books in California since 1975. The House has adopted previous versions of the measure numerous times during the past decade, but the Senate has never followed suit. The American Medical Association and 100 other medical organizations support the bill, according to a Jan. 25 joint letter to Dr. Gingrey. AMA Board of Trustees Chair Ardis Dee Hoven, MD, said total medical liability premiums in the U.S. grew by nearly 950% between 1976 and 2009, but premiums in California grew by just 261%. “Every dollar that goes toward medical liability costs is a dollar that does not go to patients who need care.” But the president of a national organization representing trial lawyers said the bill is “beyond extreme” because of the scope of its damage caps. “By removing legal accountability, attention to safety will go down and more people will suffer injuries and death from negligent care,” said American Assn. for Justice President C. Gibson Vance. Let us hear your comments on the HEALTH Act medical liability legislation. Technorati Tags: Mediation, Medical Liability Reform 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.