The Beaumont Court of Appeals has held that an arbitration agreement in an employment contract was valid and enforceable despite that the agreement included biblical scripture aspects and the parties failed to seek biblically based meditation prior to submitting their dispute to arbitration. In The Woodlands Christian Academy v. Weibust, 09-10-00010-CV, (Tex. App. – Beaumont, October 7, 2010), Monica Weibust brought claims against her former employer for constructive discharge, harassment, retaliation and employment discrimination against the Woodlands Christian Academy (Woodlands) under the Texas Labor Code. Woodlands sought to compel arbitration pursuant to an arbitration clause contained in an employment contract which existed between Weibust and Woodlands. The trial court denied arbitration. In response to the parties’ disagreement regarding whether Texas or Federal law controlled the arbitration agreement, the court found that it was subject to the Texas Arbitration Act (TAA). Weibust argued the arbitration agreement was invalid in several ways. First, she argued that the contract was null and void because it was untimely executed. To support this argument, she pointed to a provision in the contract which stated that the contract was null and void if not executed by March 28, 2008. Despite that the contract was actually executed nearly one month after the date outlined in the contract, the court held that the contract was valid based on the parties’ mutual execution at the later date and Weibust’s subsequent employment during the 2008-2009 academic year. Weibust next argued that Woodlands waived its right to seek arbitration by “taking substantial action inconsistent with the right to arbitrate.” According to the agreement, the parties mutually agreed to seek “[b]iblically based meditation” prior to submitting any dispute to arbitration as the initial dispute resolution mechanism. Because Weibust did not request the trial court to order mediation and provided no evidence to support her contention that she was prejudiced by Woodlands refusal to mediate, the Beaumont court concluded that the failure to mediate did not “nullify the right to arbitration under the contract.” Weibust also argued that Woodlands waived its right to compel arbitration by engaging in “extensive discovery prior to its arbitration request.” While the court noted that established Texas law prevents a party from unfairly switching between litigation and arbitration, it further noted that engaging in minimal discovery and court proceedings does not conclusively waive a right to arbitrate. After considering the totality of circumstances, the court held that Woodlands did not waive its right to arbitrate. In support of this holding, the court noted that there was minimal discovery conducted, no briefs on the merits were filed and there was no evidence in the record that any interrogatories or depositions had occurred. Additionally, Woodlands’ motion to arbitrate was filed well in advance of the date set for trial. Weibust argued the arbitration agreement was not enforceable by alleging that the “biblical scripture” aspects of the agreement rendered it beyond the scope of lawful and adequate judicial review and rendered it unconscionable in that it purported to preempt her rights under state and federal law in favor of biblical principles. The court declined “Weibust’s invitation to find that judicial review would be meaningless,” and noted that courts have authority to review and vacate arbitration decisions in a variety of circumstances under the TAA. Similarly, despite language in the agreement which asserted that “the Holy Scriptures (the Bible) shall be the supreme authority governing every aspect of the conciliation process,” other provisions expressly stated that the arbitration agreement’s preference for using “Holy Scriptures” did not apply in circumstances where state and federal law were preemptive. Weibust next alleged a fee-splitting provision in the arbitration agreement rendered it unconscionable. The court responded by stating her argument was “speculative at this stage,” considering that an arbitrator has discretion to alter the equal distribution of fees if necessary or financially burdensome to a party. Finally, Weibust’s argument that the unequal bargaining power which existed between herself and Woodlands at the time the contract was executed rendered the arbitration agreement unconscionable was unpersuasive to the court. The Beaumont court reversed the trial court’s order denying arbitration and remanded the case with instructions to compel arbitration. Technorati Tags: law, ADR, mediation, arbitration

According to the Eastern District of Texas, a change-of-terms provision in a credit card agreement does not defeat the parties’ mutual obligation to arbitrate. In Wynne v. American Express Co., 2:09-CV-00260-TJW, (5th Cir. Sept. 30, 2010), Todd Wynne brought deceptive trade practices, negligent misrepresentation and fraud claims against American Express (Amex), which alleged Amex’s representations regarding its “no pre-set spending limits” credit accounts were misleading and illusory. According to Amex, Wynne’s claims and credit account with Amex were both governed by an agreement which contained an arbitration clause and a class waiver. Amex filed a motion to compel arbitration and to dismiss Wynne’s claims or alternatively, to stay Wynne’s court action. After noting there was an apparent dispute between the parties regarding whether Utah or Texas law governed the dispute despite a choice of law clause in the parties’ agreement which stipulated that Utah law would apply to any dispute, the court determined that Utah law governed for two reasons. First, Amex, the agreement and credit account were all located in Utah which established a relationship more than sufficient to meet the “reasonable relationship” requirements of the Texas Uniform Commercial Code (TEX. BUS. & COMM. CODE § 1.301(a)). Second, the application of Utah law was not contrary to “a fundamental policy of Texas.” Utah law specifically allows change-of-terms provisions in credit card agreements subject to certain written notice requirements. Additionally, both Utah and Texas permit an underlying agreement to serve as consideration for a party’s agreement to arbitrate. Because of this, Wynne’s argument that the validity of the agreement to arbitrate was illusory since the terms could be changed by Amex at any time failed to convince the court. Similarly, Wynne’s reliance on the same change-of-terms provision to challenge the entire agreement also failed because the validity of the agreement as a whole is an issue for an arbitrator under the Federal Arbitration Act. Although Wynne argued that the agreement was unconscionable, the court stated that he failed to meet the “heavy burden to prove the agreement was so one-sided as to be unconscionable under either Utah or Texas law.” According to the court, the agreement contained a mutual obligation to arbitrate which did not bind one party to the benefit of the other. Moreover, the agreement contained a provision that ensured Amex would cover the cost of an opposing party’s fees above the cost of litigation. Wynne also failed to establish any facts to support a finding that the agreement was procedurally unconscionable, such as evidence of fraud, misrepresentation or unfair surprise. After the court found that both the agreement and the arbitration clause were enforceable, it next determined that Wynne’s claims were within the scope of the arbitration clause. Under the plain terms of the agreement, any claim or controversy arising from or relating to any Amex credit account were subject to the arbitration clause. Because Wynne only challenged the validity of the agreement and not its scope, and Utah, Texas and Federal law and policy favor arbitration, the court concluded “that there is a valid and enforceable agreement to arbitrate,” and held it had “no choice but to compel arbitration.” The court granted Amex’s motion to compel arbitration and stay the proceedings but denied Amex’s motion to dismiss the complaint. Technorati Tags: law, ADR, arbitration

On October 5, 2010 the Federal Trade Commission (FTC) co-hosted a “Workshop Regarding Accountable Care Organizations and Implications Regarding Antitrust, Physican Self-Referral, Anti-Kickback and Civil Monetary Penalty Laws.” The Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services’ Office of Inspector General joined the FTC in addressing several issues associated with Accountable Care Organizations (ACOs) newly authorized by the Affordable Care Act (ACA). Don Berwick, Administrator of the Centers for Medicare and Medicaid Services, began the workshop by outlining his triple aim for health care: better care for individuals, better health for populations and reduced per-capita costs. He also committed the government to interpreting applicable statutes “wisely, so as not to impede the development of ACOs.” (from HealthBlawg) FTC Chairman Jon Leibowitz and the Department of Health and Human Services’ Inspector General Dan Levinson echoed Berwick’s commitment. Why is this important? As we blogged last month, health care providers are eager to enter into new, more efficient care models but are concerned by several legal barriers to clinical integration and the implementation of ACOs. Legal barriers include: antitrust laws, the Stark Law, the Civil Monetary Penalty Law, the anti-kickback law and the Internal Revenue Code. Another reason for widespread interest is that Section 3022 of the ACA authorizes health care providers to establish ACOs in order to participate in a Medicare Shared Savings Program (Title XVIII, Section 1899). According to “Preliminary Questions & Answers” guidance promulgated by the CMS Office of Legislation: The Affordable Care Act (ACA) improves the health care delivery system through incentives to enhance quality, improve beneficiary outcomes and increase value of care. One of these key delivery system reforms is the encouragement of Accountable Care Organizations (ACOs). ACOs facilitate coordination and cooperation among providers to improve the quality of care for Medicare beneficiaries and reduce unnecessary costs. The statute requires health care organizations to meet certain requirements in order to qualify as an ACO: 1) Have a formal legal structure to receive and distribute shared savings 2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum) 3) Agree to participate in the program for not less than a 3-year period 4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings. 5) Have a leadership and management structure that includes clinical and administrative systems 6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care 7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary. The statute also specifies who may form an ACO: 1) Physicians and other professionals in group practices 2) Physicians and other professionals in networks of practices 3) Partnerships or joint venture arrangements between hospitals and physicians/professionals 4) Hospitals employing physicians/professionals 5) Other forms that the Secretary of Health and Human Services may determine appropriate. Medicare Shared Savings Programs are slated to “begin by January 1, 2012. Agreements will begin for performance periods, to be at least three years, on or after that date.” Additionally, “[f]urther details for the shared savings program will be provided in a Notice of Proposed Rulemaking which CMS expects to publish this fall.” The workshop agenda may be viewed here. Interestingly, HealthBlawg tweeted a live transcript of the workshop here. Technorati Tags: Mediation

The U.S. Supreme Court term is in full swing. Class-wide arbitration agreements have been a hot topic in the courts recently and the trend is continuing with the high court this fall. ADR news to note: Scheduled for November 9, 2010 Oral Argument AT&T Mobility LLC v. Concepcion, 09-893: A class-wide arbitration case from the 9th Circuit asking the Court 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. Certiorari denied on October 4, 2010 Louisiana Safety Association of Timbermen – Self Insurers Fund v. Certain Underwriters at Lloyd’s, London, et. al, 09-945, (No. 06-30262, 5th Circuit, November 9, 2009, unpublished): The Supreme Court was asked to consider whether Chapter 2 of the FAA is an “Act of Congress” subject to the anti-preemption provision of the McCarran-Ferguson Act. The Fifth Circuit held the McCarran–Ferguson Act did not authorize state law to reverse-preempt the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or its implementing legislation, vacated a district court’s order and remanded the case. The denial is not surprising as the U.S. Solicitor General recommended on August 26, 2010 (from Scotus Blog) that the high court deny certiorari and decline to review the issue because the circuits are not in conflict. Zurich American Insurance Company et. al v. Pioneer Natural Resources USA, Inc., 09-1305, (No. 09-31031, 5th Circuit, December 17, 2009, unpublished): The Supreme Court was asked to consider whether, in a case removed under the Convention on the Recognition and Enforcement of Arbitral Awards, 9 U.S.C. § 205, an order denying a motion to compel arbitration and remanding to state court is appealable under the FAA’s express right of interlocutory appeal from such denials, 9 U.S.C. § 16(a)(1)(C), notwithstanding 28 U.S.C. § 1447(d). The Fifth Circuit held that such a decision could not be appealed when issued simultaneously with a remand decision not subject to appeal under 28 U.S.C. § 1447(d). Disputing blogged about both the Zurich and AT&T cases in June here. Technorati Tags: law, ADR, arbitration