On Monday, the U.S. Supreme Court denied certiorari in Certain Underwriters at Lloyd’s, London v. Lagstein, 10-534. The case sought to address whether a “manifest disregard of the law” standard of review for arbitration awards remains after the Court’s decision in Hall Street Associates, L.L.C v. Mattell, Inc., 552 U.S. 576 (2008). In the case, Lagstein, a medical doctor, filed a claim for disability benefits under a policy he purchased from Certain Underwriters at Lloyd’s, London (Lloyd’s). After two years without payment on his claim, Lagstein filed a lawsuit in federal court. A district court stayed the case and the parties entered into binding arbitration pursuant to the terms of the disability policy. A three-member arbitration panel awarded Lagstein “full policy benefits, emotional distress damages, and punitive damages, all of which totaled more than six million dollars.” The district court refused to confirm the arbitral award, however, and vacated it on the grounds the award was excessive and in manifest disregard of the law. Additionally, the district court vacated the punitive damages award because the arbitral “panel lacked jurisdiction to enter it after the panel had entered its compensatory award.” Lagstein appealed the district court’s vacatur of the arbitral award. The Ninth Circuit Court of Appeals reversed the district court’s vacatur and remanded the case. According to Lloyd’s petition for certiorari, (from SCOTUSblog) the questions presented included: 1. (a) Whether review of an arbitration award for “manifest disregard of the law” or “complete irrationality” remains available after Hall Street Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), a question that this Court again expressly reserved in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 559 U.S. __, 130 S. Ct. 1758 (2010), and on which there is a clear Circuit conflict; and (b) If such review is available, may a reviewing court determine whether an award is irrational under the totality of the circumstances (as the district court did here and as the Second Circuit permits), or are awards impregnable unless it is “clear from the record that the arbitrators recognized the applicable law and then ignored it” (as the Ninth Circuit below held). 2. Whether the Federal Arbitration Act (“FAA”) requires vacatur of an arbitral award issued by arbitrators who failed to disclose material facts bearing on their integrity and their relationships with each other, in violation of the applicable rules governing arbitrations, or (as the Ninth Circuit held) are arbitrators required to disclose only their relationships with the parties and counsel, with the burden to investigate and unearth other material facts falling on the parties. 3. Whether arbitrators “exceed their powers” within the meaning of Section 10(a)(4) of the FAA when they issue an arbitral award after the deadline expressly agreed to by the parties in accordance with the governing arbitration rules. Because the Supreme Court denied Lloyd’s certiorari petition, the Ninth Circuit’s opinion will stand. Disputing has discussed the implications of Hall Street Associates many times since it was decided. You may read some of those posts here, here, here and here. We would love to hear your thoughts. Technorati Tags: law, ADR, arbitration

Jacqueline M. Nolan-Haley, Professor of Law and Director of the ADR and Conflict Resolution Program at Fordham University School of Law, has written an interesting article entitled Mediation: The “New Arbitration,” 17 Harvard Negotiation Law Review, Forthcoming; Fordham Law Legal Studies Research Paper No. 1713928. In the article, Professor Nolan-Haley argues that the boundaries between mediation and arbitration have become increasingly blurred and the mediation process is currently at a crossroads. Here is the abstract: Mediation once offered disputing parties a refuge from the courts. Today it offers them a surrogate for arbitration. As lawyers become increasingly involved representing parties in mediation, the boundaries between mediation and arbitration are blurring. Lawyers generally control the mediation process, considering it the functional equivalent of a private judicial settlement conference. Legal mediation has taken on many of the features traditionally associated with arbitration – adversarial posturing by attorneys in the name of zealous advocacy, adjudication by third party neutrals, and the practice of mediator evaluation. While mediation advances toward an arbitration model, arbitration is becoming the “new litigation.” I argue that mediation’s move to the zone of arbitration practice is problematic because it clashes with mediation’s core values of self-determination and participation. This directional shift limits the spectrum of options available to disputing parties, depriving them of mediation’s benefits– the opportunity to experience individualized justice as a relief from the rigidity of the formal justice system. Mediation stands at the crossroads and it is worth reflecting on whether the time has come to pull in the reins. The article is available here (without charge) from Social Science Research Network. Disputing welcomes your thoughts and comments. Technorati Tags: ADR, law, mediation, arbitration

The Western District of Texas has compelled arbitration where the parties to a construction contract entered into an agreement which provided only one party with the discretion to submit any disputes to binding arbitration. In United States ex rel. Gillette Air Conditioning Co. v. Satterfield & Pontikes Constr., No. SA-10-CV-778XR, (12/7/2010), Satterfield & Pontikes Construction Inc. (Satterfield) entered into a subcontract with Gillette Air Conditioning Company (Gillette) to provide HVAC and plumbing work on an building renovation and upgrade at Fort Sam Houston Training Barracks with a Full Spectrum Plumbing. After the work was completed, Gillette filed suit alleging that in addition to fulfilling its obligations pursuant to the contract, the company was also required to perform added work due to errors caused by Satterfield. Gillette also alleged that Satterfield breached the parties’ contract by failing to pay for labor and materials and by providing Gillette with flawed performance specifications. Satterfield moved to compel arbitration pursuant to the parties’ contract. The contract stated: (b) In the event any controversy or dispute arises between Subcontractor [Gillette] and Contractor [Satterfield] relating to this Subcontract (or a breach thereof), which dispute or controversy does not involve the correlative rights and duties of Owner, Subcontractor shall request mediation of the dispute with Contractor and the parties shall attempt in good faith to mediate the dispute. Mediation of the dispute shall be a condition precedent to any further rights that the Subcontractor has to the resolution of this dispute. (i) If mediation is unsuccessful, then Subcontractor agrees that Contractor shall make the determination (in its sole discretion) as to whether the dispute shall be settled by binding arbitration in accordance with the Construction Industry Arbitration Rules (then applicable) of the American Arbitration Association (in which Subcontractor agrees that it will submit its disputes to such arbitration and that such arbitration will be binding to the full extent enforceable under applicable arbitration statutes including the Federal Arbitration Act). Any arbitration held under this provision shall be held in Harris County, Texas. (ii) In the event that Contractor determines that the dispute shall not be resolved through arbitration, then Subcontractor agrees that the dispute will be resolved by courts of competent jurisdiction in Harris County, Texas. Contract, Art. 12(b). The contract also provides that “[t]his Subcontract shall be governed by the laws of the State of Texas . . . .” Contract, Art. 9(m). Gillette “responded to the motion to compel arbitration by arguing that the arbitration clause is illusory and therefore unenforceable because it gives Satterfield the sole discretion to determine whether the dispute should be settled by arbitration.” The court began its inquiry by performing a two-step analysis: first, we determine whether the parties agreed to arbitrate and, second, whether a federal statute or policy renders the claims nonarbitrable. Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th Cir. 2003). The courts divide the first step into two more questions: whether a valid agreement to arbitrate exists and whether the dispute falls within that agreement. Id. Gillette did not dispute that an agreement to arbitrate existed, but instead argued “only that the arbitration clause is illusory and thus unenforceable.” According to the court, “That issue is governed by Texas law. See Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294, 301 (5th Cir. 2004).” After distinguishing J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003), and In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 677 (Tex. 2006), the Western District held that the arbitration agreement was not illusory. According to the court, “Satterfield did not promise to arbitrate but then retain a unilateral right to avoid the arbitration. Thus, Satterfield did not make an illusory promise to arbitrate.” The court continued by stating: Given the express contractual language, the situation here is more akin to that in First Merit Bank, where the plaintiff complained the arbitration agreement was substantively unconscionable because it bound the plaintiff to arbitrate with the manufacturer but did not bind the manufacturer to arbitrate all claims with the plaintiff. Gillette has not argued that the arbitration agreement here is unconscionable, only that it is illusory. Even considering the issue of unconscionability, however, the Texas Supreme Court did not find the unequal arbitration clause in First Merit Bank to be unenforceable, and has subsequently re-affirmed the principle that “arbitration clauses generally do not require mutuality of obligation so long as adequate consideration supports the underlying contract.” In re Lyon Fin. Servs., Inc., 257 S.W.3d 228, 233 (Tex. 2008); . . . Because the parties agreed to arbitrate, Gillette failed to allege that the underlying contract lacked consideration or to demonstrate the arbitration clause was unenforceable, and “no federal statute or policy renders the claims nonarbitrable,” the Western District of Texas granted Satterfield’s motion to compel arbitration. Disputing blogged about one of the cases on which the court relied, In re Palm Harbor Homes, Inc., when it was decided here. Technorati Tags: law, ADR, arbitration

by Holly Hayes An article in the November 18, 2010 issue of the New England Journal of Medicine (NEJM) explores “Medical Malpractice Liability in the Age of Electronic Health Records.” The Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 authorized an estimated $14 billion to $27 billion to promote “meaningful use” of electronic health records (EHRs) by clinical providers. The authors of the article believe, “In the excitement over health information technology, some of the potential risks associated with it have received less attention, such as the possible effects of this technology on medical malpractice liability.” The article states: The liability implications of EHRs are likely to vary over the life cycle of the adoption of these systems. We begin by examining the period of initial transition to EHRs, during which predictable implementation snags may heighten providers’ liability risk. After this initial period, EHRs have the potential to reduce injuries and malpractice claims but will also create opportunities for error and will alter the context for proving and defending malpractice claims with the use of electronic information. Finally, the long-term effects of widespread adoption of EHRs include potential shifts in the legal standard of care that may not favor providers. The authors of the NEJM article advise health care providers to actively manage EHR-associated risks through the following steps: First, they can decline to sign contractual provisions that immunize the system developer. Second, they can select systems that are designed to minimize the risk of user error or misuse and maximize the ease of record retrieval. Third, organizations that adopt EHRs can ensure that clinicians receive thorough training, including education about organizational expectations regarding the use of the system. Hospitals can monitor the use of the system after implementation for obvious problems. Physicians, for their part, must be willing to climb the learning curve. Understanding how using EHRs may help protect them from liability, and how misuse or nonuse may increase liability risk, should motivate them to do so. Fourth, organizations can ensure that practice conditions are such that the use of the new technology can be maximized. Identification of appropriate practice conditions will require organizations to work closely with their care teams to identify existing barriers to the optimal use of EHRs, whether these involve the length of office visits, the placement of computer terminals, problems accessing external records, or other factors. Fifth, managing patients’ expectations about secure messaging and accessing of EHRs is pivotal. Finally, when physicians serve as experts in malpractice litigation, they can educate liability insurers and courts about the limitations of clinical-decision support systems and the appropriateness of departures from them in certain situations. Early in November, Disputing posted a beginner’s guide to negotiating an Electronic Health Record (EHR) software license agreement. We welcome your comments on medical malpractice as it relates to the implementation of EHRs. 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. Technorati Tags: Mediation