The U. S. Supreme Court will hear AT&T Mobility LLC v. Concepcion, 09-893, a class-wide arbitration case from the 9th Circuit, today. In the case, the Court is asked to consider whether the Federal Arbitration Act (FAA) preempts states from conditioning enforcement of an arbitration agreement on the availability of particular procedures when those procedures are not necessary to ensure that the parties to the arbitration agreement are able to vindicate their claims. A preview of the case is available here (from ScotusBlog). Case briefs and documents may be viewed here (from ScotusBlog). Disputing will provide a detailed account of the argument tomorrow. Our previous posts about the case can be read here, here, here, here and here. Technorati Tags: law, ADR, arbitration

by Philip J. Loree Jr. Part I: Introduction Virtually every year the United States Supreme Court’s docket features a number of politically-charged, controversial cases, plus some run-of-the-mill ones that do not inspire much in the way of intensive, ideological debate. Generally the Court’s arbitration-related cases fall into this latter category, though last term saw the Court decide 5-3 and 5-4 along ideological lines two politically controversial ones: Stolt-Nielsen, S.A. v. AnimalFeeds, Inc., 559 U.S. ___, 130 S. Ct. 1758 (2010); and Rent-A-Center West v. Jackson, 561 U.S. ___, 130 S. Ct. 2772 (2010). This Tuesday the Court will hear oral argument in the one Federal-Arbitration-Act-related case it has thus far agreed to hear this term: AT&T Mobility LLC v. Concepcion, No. 09-893. And while AT&T Mobility may be the only Federal Arbitration Act case before the Court this term, it is probably more controversial than Stolt-Nielsen and Rent-A-Center combined. The question before the Court is whether the Federal Arbitration Act preempts California’s Discover Bank rule, which renders a class-action or class-arbitration waiver unenforceable on unconscionability grounds if it: [1]. . . [Is] found in a consumer contract of adhesion [2] in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and [3] when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money. Discover Bank v. Superior Ct., 36 Cal.4th 148, 162-63 (2005). The preemption question before the Supreme Court raises two subissues: (1) whether Section 2 of the Federal Arbitration Act expressly preempts the Discover Bank rule; and (2) whether the Federal Arbitration Act impliedly preempts the rule. The express preemption question turns on the language of Section 2, which declares all arbitration agreements within its scope to be “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Section 2 establishes substantive federal law that expressly preempts all conflicting state law, except for state law that permits “the revocation of any contract” or governs the formation, interpretation, or construction of contracts generally. State laws that discriminate against arbitration agreements are preempted by Section 2. If the Supreme Court finds that the Discover Bank rule is simply an application of California law on unconscionability and exculpatory contracts, then it will hold that the Discover Bank rule is not expressly preempted by Section 2. But if it finds that the Discover Bank rule is not really a rule that applies to all contracts generally, but principally to arbitration agreements, then it will find that the rule discriminates against arbitration agreements in violation of Section 2. But if the Supreme Court finds that the Federal Arbitration Act does not expressly preempt the Discover Bank rule, it must also consider whether the Federal Arbitration Act impliedly preempts the rule. One type of implied preemption is known as “conflict preemption,” which “exists if compliance with both state and federal law is impossible or where state law stands as an obstacle to the accomplishment and execution of the full purposes of Congress.” Shroyer v. New Cingular Wireless Serv., Inc., 498 F.3d 976, 988 (9th Cir. 2007) (citations and quotations omitted). State laws or policies that undermine “the goals and policies of the FAA” are thus preempted by the Act. Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Univ., 489 U.S. 468, 477-78 (1990). If the Court finds that the compliance with both the Federal Arbitration Act and the Discover Bank rule is impossible, or application of the rule would frustrate the purposes and intent of the Federal Arbitration Act, then it will find that the Act impliedly preempts Discover Bank. Our focus in this multi-part guest post will be on the extent to which Stolt-Nielsen bears on the preemption questions before the Court, and in particular, what (if anything) we can glean from the upcoming oral argument about those questions. If you are an arbitration fanatic (thankfully, a rare breed), then you are surely planning to download and read the oral argument transcript as soon as it becomes available (usually about 4:00 p.m. on the day of argument, here). But whether or not you’re planning to do that, reflect on this: Stolt-Nielsen was the product of a sharply divided Court. Associate Justice Samuel J. Alito, Jr. wrote the majority opinion, which was joined in by Chief Justice John G. Roberts, Jr. and Associate Justices Antonin G. Scalia, Anthony M. Kennedy and Clarence Thomas. Associate Justice Ruth Bader Ginsburg, joined by Associate Justices John Paul Stevens and Steven G. Breyer, dissented. Associate Justice Sonia M. Sotomayor did not participate in the decision, and Associate Justice Elena Kagan has, of course, replaced the now-retired Justice Stevens. The five Justices that formed the majority in Stolt-Nielsen are presumably the ones most likely to vote for reversal of the Ninth Circuit in AT&T Mobility. Stolt-Nielsen dissenters Justices Ginsburg and Breyer are unlikely to accord that decision much, if any, weight. And even though we cannot predict with any reasonable certainty whether Associate Justices Sotomayor and Kagan are likely to consider Stolt-Nielsen as controlling the outcome in AT&T Mobility, we suspect that they are probably more likely to favor allowing California apply its Discover Bank rule in Federal Arbitration Act cases. The Stolt-Nielsen majority, however, does not speak with one voice when it comes to implied preemption. Justice Thomas does not believe that the judicial doctrine of implied preemption is constitutional. According to his concurring opinion in Wyeth v. Levine, 555 U.S. ___, 129 S. Ct. 1187 (2009), “implied pre-emption doctrines that wander far from the statutory text are inconsistent with the Constitution. . . .” 129 S. Ct. at 1205 (Thomas, J., concurring). Moreover, he believes that the Federal Arbitration Act does not apply in state court, and, while AT&T Mobility was brought in federal court, that suggests he favors a more deferential approach […]

by Holly Hayes Physician News Digest posted a beginner’s guide to negotiating an Electronic Health Record (EHR) software license agreement. EHR contracts are similar to other software license agreements, but issues specific to health care, including provisions related to HIPAA and “meaningful use” provisions, need to be addressed. The guide focuses on five key areas of a software license agreement (SLA): User license Implementation Service obligation Hardware and interfaces HITECH Act clauses User License — We begin our tutorial with the user license for one main reason: you will almost always be able to negotiate licensing costs. In enterprise software negotiations, some vendors offer as much as a 20% baseline discount (source). Small practices likely won’t come close to this level of discount, but it gives you an idea of how much room you may have to bargain. Before talking about price, you’ll need to define “user.” An EHR license agreement is unique in that a single user license may include multiple employees. For example, a user license for one MD may include mid-level providers (nurses and physician’s assistants), as well as administrative staff. Alternatively, you might use a tiered pricing structure with one high cost for MDs, a lower cost for mid-level providers and an even lower cost for administrative staff. Finally, “site” and enterprise licenses exist for large medical facilities and hospitals. After defining “user,” several questions still need to be addressed. Is there a limitation on how many computers the software can be installed on? Can it be used at multiple offices? Can the license be sold or transferred if the practice is sold or merges with another company? It is important to anticipate possible scenarios of how, where and who will access the software, then address these in the contract. Implementation — Not all software vendors offer implementation services – some rely on a network of value added resellers (VARs) to provide implementation services – but it is still worth discussing here because of the high costs. For every dollar the EHR costs, you can expect to pay at least one dollar for implementation services. In larger offices or more complex environments, this ratio can be even higher; a two-to-one or even five-to-one ratio is not uncommon. Implementation costs are based off hourly rates and an estimate of hours to complete the setup. It can also be based on monthly rates, which is sometimes cheaper. In some cases, the vendor will provide a fixed cost, but that is less common. Regardless, it is important to settle on implementation expenses in the initial agreement. You’ll have the most leverage during the negotiation process and prices will likely go up after you are in a contract. After negotiating costs, you’ll need to agree on the details of the implementation process. For example, who will be responsible for transferring data into the new EHR? Will you be transferring data from another system or from paper records? What are the costs? You should also develop an implementation timeline, determine what kind of strategy you’ll pursue (e.g. “phased rollout”) and decide which implementation activities the vendor will be responsible for. Poor planning is a leading cause of failed software implementations, so be prepared. Ongoing Service Obligations — Next, we address the service obligations, or support, updates and maintenance. Depending on the length of your contract, the service agreement will be the second or largest expense of your EHR software purchase. It is not uncommon for maintenance and support to be as much as 20% to 30% of the original software purchase price. Each part of the service section deserves attention. Here are a few key considerations to begin with: Support – What hours of support will be available? Does it include telephone support, in-person technical support, or both? What happens if the EHR vendor doesn’t meet the support requirements? Will the contract include a clause for negligence of support and require vendors to face a penalty – either monetary or other? Updates – How often will updates be rolled out? Are you required to install all updates? Keep in mind, changes to the functionality of the EHR could affect your workflow and office efficiency. Maintenance – What new software releases are included in the maintenance agreement; for example, does the agreement just include patches for bugs, are are new functional capabilities included? How are the maintenance fees calculated? Training – How many hours are included? What does it cost if you exceed the specified hours? Who will be trained and where will they be trained? Will you be charged for travel-related expenses for on-location training? Hardware and Interfaces — Next, on to hardware. In addition to discussing hardware with your EHR vendor, be sure to compare prices from third party vendors. You should be able to get hardware specifications from your vendor’s website or just by request. You can then use this information to get price quotes from other hardware vendors. You might find a better price elsewhere or just have extra leverage when it comes time to negotiate with the EHR vendor. Conversely, the integration or interfacing of devices is better left to the EHR vendor. This can include everything from scanners and faxes to more complex devices like laboratory information systems and electrocardiogram (ECC/EKG) equipment. Make sure your agreement clearly identifies who will provide ongoing support for interfaces. You don’t want to get stranded if both the EHR vendor and device manufacturer claim the other should provide support. HITECH Act Clauses — Several EHR software vendors have started adding provisions for the HITECH Act into their license agreements. As details about “meaningful use” and “certified technology” are revealed every few months, it’s important to make sure this section is up to date. Additionally, with thousands of dollars at stake, it’s important to identify any ambiguities. What happens if you fail to achieve meaningful use? Do you receive a reimbursement covering the full amount of Stimulus Bill incentives? Or are you only reimbursed for the cost of the software? Ultimately […]

The Dallas Court of Appeals has held the mandatory notice requirements set forth in Section 74.451 of the Texas Civil Practice and Remedies Code rendered an arbitration provision unenforceable where the McCarran-Ferguson Act (MFA), 15 U.S.C. § 1012(b), preempted the Federal Arbitration Act (FAA). In In re Sthran, No. 05-10-01176-CV (October 29, 2010), Etta Sthran (relator) sued Forest Lane Healthcare Center and THI of Texas at Forest Lane, LLC (Forest Lane), a nursing home, for “negligent acts and omissions” which caused damages to her husband during his lifetime and “were a proximate cause of his death.” Prior to the decedent’s admittance to Forest Lane, however, relator signed a contract which required that any future disputes between the parties be resolved through binding arbitration. Forest Lane filed a motion to compel arbitration citing the contract provision signed by relator. After the trial court ordered relator’s claims for her individual damages which were not derivative of her husband’s claims to arbitration, relator sought a writ of mandamus. Relator argued that the arbitration provision in the contract was unenforceable because it failed to satisfy mandatory notice requirements set forth in Section 74.451 of the Texas Civil Practice and Remedies Code. Section 74.451 states, in relevant part: (a) No physician, professional association of physicians, or other health care provider shall request or require a patient or prospective patient to execute an agreement to arbitrate a health care liability claim unless the form of agreement delivered to the patient contains a written notice in 10-point boldface type clearly and conspicuously stating: UNDER TEXAS LAW, THIS AGREEMENT IS INVALID AND OF NO LEGAL EFFECT UNLESS IT IS ALSO SIGNED BY AN ATTORNEY OF YOUR OWN CHOOSING. THIS AGREEMENT CONTAINS A WAIVER OF IMPORTANT LEGAL RIGHTS, INCLUDING YOUR RIGHT TO A JURY. YOU SHOULD NOT SIGN THIS AGREEMENT WITHOUT FIRST CONSULTING WITH AN ATTORNEY. Forest Lane did not allege that the contract complied with Section 74.451 nor that relator’s claims were not “health care liability” claims. Instead, Forest Lane responded by stating the FAA preempted Section 74.451. According to the court, the MFA: will prevent a federal statute from preempting a state statute if (1) the federal statute at issue does not specifically relate to the “business of insurance,” (2) the state law was enacted for “the purpose of regulating the business of insurance,” and (3) the federal statute operates to “invalidate, impair, or supersede” the state law. After distinguishing the case from Doctor’s Associates, Inc.v. Casarotto, 517 U.S. 681 (1996), the court concluded “…without deciding that the FAA could preempt the notice requirement of section 74.451… the MFA reverse preempts the FAA with regard to such notice requirement in this case.” The Dallas court also determined the relator had no adequate remedy by appeal because: it is not clear that any fees and expenses incurred as a result of arbitration will be recoverable. Further, because this case is one of those “rare cases” when legislative mandates might be construed to conflict, mandamus will “preserve important substantive and procedural rights from impairment and loss, [and] allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments.” Finally, the court dismissed Forest Lane’s argument that relator’s petition for mandamus was untimely since Forest Lane failed to demonstrate a detrimental change in position. Because the mandatory notice requirements set forth in Section 74.451 rendered the arbitration provision unenforceable and relator had no adequate remedy by appeal, the Dallas Court of Appeals ordered the trial court to vacate its order compelling arbitration. Disputing has discussed reverse preemption in the past here, here and here. Technorati Tags: arbitration, ADR, law