The Dallas Court of Appeals has held that a letter which sought clarification regarding whether the other party to a contract wished to proceed with arbitration as provided for in the contract or whether a claim should be filed before a state district court did not alter the arbitration agreement. In Minkoff v. Hicks, No. 05-10-00606-CV (Tex. App. — Dallas, Oct. 21, 2010), Peter Minkoff entered into a contract to build a residence for Jeffrey Hicks and Lisa Winston (appellees) in July 2002. The contract contained a provision which required arbitration for any dispute arising under the contract and provided the parties with seven days from the notice of any dispute to select an arbitrator. On December 11, 2009, appellees informed Minkoff in writing that they were terminating the contract. On January 20, 2010, Minkoff replied with a letter stating that he tendered performance and the parties owed him $97,000. Minkoff additionally stated that he would settle for $75,000, but also provided the appellees with the option to select an arbitrator in lieu of his settlement offer. Appellees responded by arguing that Minkoff waived his right to seek arbitration by failing to select an arbitrator within seven days of their December 11th letter. Minkoff sent another letter to appellees on January 28th which stated that he intended to pursue his claim and asking that appellees notify him whether they wished to proceed with arbitration or for him to file a claim before a state district court. Appellees did not respond to Minkoff’s letter and instead brought suit against him in Dallas County Court seeking declaratory relief and damages. Minkoff responded and sought an order to compel arbitration. The county court requested a briefing regarding whether Minkoff’s January 28th letter “constituted an offer such that there was a novation or modification [of] the contract when appellees sued in state court.” Appellees argued that the January 28th letter constituted an offer to modify the contract which they accepted by filing in county court. The court agreed and refused Minkoff’s motion to compel arbitration. Minkoff appealed. On appeal, the Dallas Appeals Court held that Minkoff’s letter did not alter the arbitration agreement and that the county court erred by denying his motion to compel arbitration. First, the Appeals Court determined that the letter did not constitute an offer but was a request for information from appellees. Minkoff’s letter did not suggest any intention to waive any of his rights under the contract nor was there any clear terms of an offer. Second, even assuming an offer, it was not clear to the court how appellees filing a lawsuit constituted an acceptance as the letter clearly intimated that Minkoff himself would pursue his asserted rights by either seeking arbitration or bringing suit in a district court, rather than a county court. Finally, the Dallas court held that no a “meeting of the minds” occurred. Because appellees failed to meet their evidentiary burden to establish the arbitration agreement was modified, the Dallas Court of Appeals reversed and remanded the case. Technorati Tags: law, ADR, arbitration

by Holly Hayes The Medical Group Management Association (MGMA) annual meeting is being held in New Orleans this week. Yesterday, Marshall Baker, CEO of Physician Advisory Services, Boise, Idaho, led a discussion about Ambulatory Surgery Centers (ASC) and the opportunities available to surgeons despite that accreditation requirements for ASCs are getting stricter. Communication is key to a successful ASC, Baker said, explaining that no one should walk in on a Monday morning and be surprised by any changes. Also, he said physicians need to know upfront that bad behavior is not tolerated—even if they are the ASC’s top revenue producer. He suggested that ASCs conduct frequent satisfaction surveys of patients and area doctors, and said it was especially helpful to ask the physician community if they would refer patients to the ASC and, if not, why not. Another tip Baker passed along was to conduct frequent drills so staff will know exactly what to do in case of a fire, power outage, attempted child abduction or if a patient or patient family member becomes disruptive. He also said it’s a good idea to have employees navigate the facility in a wheelchair to test its accessibility. Once again, the communication themes among caregivers, patients, families and the community, as well as zero tolerance of disruptive behavior in the medical setting, point toward an important role for conflict resolution skills development in healthcare personnel. We welcome your thoughts on this topic. 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

In Las Palmas Medical Center v. Moore, No. 08-09-00226-CV (October 6, 2010), the El Paso Court of Appeals reversed a lower court’s decision to overturn an arbitration award and adopted a de novo standard of review for vacation, modification, or confirmation of an arbitration award. In 2004, the Las Palmas Medical Center (Las Palmas) recruited urologists Robert Moore and Deborah Moore to relocate from Houston to El Paso by offering the Moores a guaranteed income if they agreed to practice full-time in El Paso for 48 months. The parties’ agreement also allowed Las Palmas to audit the Moores’ medical practice to ensure compliance with the agreement. Additionally, both parties agreed to arbitrate any disputes arising out of the agreement. In December 2006, Las Palmas requested documents from the Moores in an effort to conduct an audit. The requested information was not provided and in October 2007 Las Palmas initiated arbitration proceedings. An arbitrator was selected from a list of potential arbitrators provided to both parties. The arbitrator properly notified counsel for both parties that she had had previous professional contact with Las Palmas’ counsel and invited formal objections before the arbitration began. Neither party objected. As part of the arbitration proceedings, an audit of the Moores’ practice records was completed by January 21, 2008. Around this time, the Moores changed their legal counsel in the arbitration. On July 31, 2008, 11 days before the final arbitration hearing, the Moores’ counsel challenged the arbitrator’s objectivity due to her prior contact with Las Palmas’ counsel. After review, the arbitrator determined the challenge was not substantial given her prior disclosure. Moreover, she determined that withdrawing at that time would cause undue delay and expense for both parties. After the final hearing, she issued a written judgment finding fault with both parties but with a net award to Las Palmas of $1,055,322.27. This award was largely based on a finding that Deborah Moore failed to maintain a full-time urology practice in El Paso as required by the parties’ agreement. On September 15, 2008, Las Palmas filed a petition to confirm the arbitration award and the Moores filed an answer which contained several affirmative defenses, including that the award was obtained by corruption, fraud, or other undue means, that the Moores’ rights were prejudiced by “the evident partiality of the arbitrator,” that the arbitrator engaged in willful misbehavior by performing the role of an advocate and that the arbitrator refused to hear material evidence by limiting the testimony of an expert witness. The arbitration transcript, evidence from the proceeding and a deposition of the arbitrator were entered as evidence. The trial court subsequently entered an order which denied Las Palmas’ petition, set aside the arbitration award and ordered that the dispute be reheard by a different arbitrator. Las Palmas appealed. On appeal, the Moores initially challenged the court’s jurisdiction by arguing that a directed rehearing was not an appealable judgment or decree under TEX. CIV. PRAC. & REM. CODE ANN. § 171.098(a). In affirming the propriety of its jurisdiction, however, the El Paso Court relied on a recent Texas Supreme Court decision in East Texas Salt Water Disposal Co. v. Werline, 307 S.W.3d 267 (Tex. 2010) which “held that a district court judgment which denies confirmation of an arbitration award, vacates the award, and directs a rehearing is appealable.” The El Paso Court then noted that “[i]ntermediate appellate courts in Texas have utilized different standards of review for vacation, modification, or confirmation of an arbitration award.” Specifically, the El Paso Court pointed out that the San Antonio Court utilized an abuse of discretion standard “without citing authority” in Koch v. Koch, 27 S.W.3d 93, 95 (Tex.App.— San Antonio 2000, no pet.), while in Kendall Builders, Inc. v. Chesson, 149 S.W.3d 796, 802-03 (Tex.App.— Austin 2004, pet. denied) the Austin Court of Appeals “applied traditional sufficiency-of-the-evidence review.” The court also noted that in other cases, “one or both of the parties filed summary judgment motions and the appellate courts employed the applicable summary judgment standard of review.” In ultimately adopting a form of de novo review, the El Paso Court first noted that it agreed with Werline that abuse of discretion was not the appropriate standard of review. Second, the Court stated that while in “true” de novo review, the appellate court “exercises its own judgment and redetermines each issue of fact and law” without affording any deference, the U.S. Supreme Court in First Options of Chicago, Inc. Kaplan, 514 U.S. 938 (1995) “cited with approval the following standard utilized at the time by the majority of the circuits: the reviewing court accepts findings of fact that are not “clearly erroneous” but decides questions of law de novo.” The El Paso Court further noted that this “standard of review approved by the United States Supreme Court is not true de novo, but is comparable to the standard by which Texas appellate courts review factual findings for legal and factual sufficiency, and review legal conclusions de novo.” After reviewing the record, the Court held that the trial court did not make any factual determinations entitled to deference and stated any questions of law were reviewed de novo. The El Paso Court found that the Moores failed to meet the evidentiary burden to establish any of the four grounds for reviewing an arbitration award provided by the Texas General Arbitration Act (TAA) (TEX. CIV. PRAC. & REM. CODE ANN. § 171.088(a)). The Court also noted the similarities between section 171.088(a)(2)(A) of the TAA and section 10(a)(2) of the Federal Arbitration Act (FAA) before concluding that evident partiality of an arbitrator “can be established through a showing of actual bias.” Although the Texas Supreme Court “has not provided guidance as to the standard to be applied when reviewing a claim of evident partiality based on actual bias,” the Moores pointed to Babcock & Wilcox Co. v. PMAC, Ltd., 863 S.W.2d 225, 233-34 (Tex.App.— Houston [14th Dist.] 1993, writ denied) as establishing a “reasonable impression of partiality standard.” The El […]

The Texas Supreme Court has held that an arbitration agreement signed as a condition of continued employment was not illusory and did not require a savings clause. In In re 24R, Inc., D/B/A The Boot Jack, No. 09-1025 (Tex. Oct. 22, 2010), Frances Cabrera was an at-will employee for 24R, Inc. d/b/a “The Boot Jack” for approximately 15 years. In 2003, 2004 and 2005 she signed an arbitration agreement as a condition of continued employment. In 2007, she developed a medical condition and was ordered by her doctor to eat all of her meals prior to 6 pm. Approximately four months later, Cabrera was terminated by The Boot Jack. She filed suit alleging age and disability discrimination on the theory she was terminated because she requested accommodations to comply with the directions of her doctor. The Boot Jack filed a motion to compel arbitration pursuant to the parties’ 2005 arbitration agreement. The trial court denied the motion to compel arbitration and The Boot Jack sought mandamus relief in the court of appeals. The Corpus Christi Appeals Court denied The Boot Jack’s writ of mandamus (In re 24R, Inc., ___ S.W.3d ___ (Tex. App. Corpus Christi). The Boot Jack then sought mandamus relief from the Texas Supreme Court. Cabrera’s case relied upon the Texas Supreme Court’s decision in In re Halliburton, 80 S.W.3d 566 (Tex. 2002) and a 2003 appellate decision, In re C & H News Co., 133 S.W.3d 642 (Tex. App. – Corpus Christi 2003, orig. proceeding). In Halliburton, the Texas Supreme Court held that the arbitration agreement at issue was not illusory because, although the employer “explicitly reserved the right to unilaterally modify or discontinue the dispute resolution program,” a ten-day notice provision and another provision which stated any amendment could only apply prospectively functioned as a “savings clause” which prevented the employer from avoiding its contractual obligation to arbitrate. Cabrera also relied on the ruling in C & H News which held that an arbitration agreement which incorporated an employee handbook by reference was illusory and unenforceable because the “employer retained the right to unilaterally change the handbook at anytime without prior notice.” Cabrera argued that the arbitration agreement lacked consideration and was illusory because “The Boot Jack retained the right to amend the agreement and was not mutually bound,” and The Boot Jack’s employee manual retained the power to modify or abolish any personnel policy, including the arbitration agreement. The Court disagreed, however, and stated the employee manual was not part of her employment contract because it included an express disclaimer that the “policies and procedures in this manual are not intended to be contractual commitments . . .” The Texas Supreme Court distinguished C & H News, because it found that The Boot Jack’s employee policy manual was a wholly separate document “that does not impose any contractual obligations.” The mere fact that “language in the employee manual recognizes the existence of the arbitration agreement . . . does not diminish the validity of the arbitration agreement as a stand-alone contract.” According to the Court, because the employment contract and arbitration agreement did not incorporate the employee policy manual such that The Boot Jack could have modified the terms at any time without prior notice, the contract and arbitration agreement were not illusory and therefore did not require a Halliburton savings clause. After finding that the arbitration agreement was not illusory, the Texas Supreme Court held that the trial court erred by refusing to compel arbitration, conditionally granted mandamus relief and directed the trial court to vacate its order denying The Boot Jack’s motion to compel arbitration. Disputing blogged here about a similar Texas Supreme Court opinion issued in 2006. Technorati Tags: law, ADR, arbitration