The Fifth Circuit has held that the question of arbitrability is for an arbitrator to decide where an arbitration agreement exists between the parties and they clearly intended for the issue to be arbitrated based on the wording of the arbitration provision. In Allen v. Regions Bank, No. 09-60705, (5th Cir., August 11, 2010), plaintiffs (the Allens) obtained a home equity loan from First American National Bank in October 1999. The bank withheld funds from the loan proceeds in order to purchase credit life and disability insurance. Two months later, AmSouth Bank succeeded First American National Bank as the loan holder. In 2004, the Allens attempted to file a claim on the disability policy but were told by AmSouth Bank that no such policy existed. Regions Bank subsequently acquired the loan from AmSouth via merger. In October 2007, Regions Bank mailed an explanation of its merger with AmSouth Bank to the Allens. A lengthy “Consumer Disclosure Booklet” (booklet) which purported to constitute a new agreement relative to deposit accounts was also included. The booklet stated that a “dispute regarding whether a particular controversy is subject to arbitration, including any claim of unconscionability and any dispute over the scope or validity of this agreement to arbitrate disputes or of this entire Agreement, shall be decided by the arbitrator(s).” Additionally, the booklet stated the arbitration provision shall “also apply to any account, contract, loan, transaction, business, contact, interaction or relationship you may have” with the bank. In 2008, the Allens again sought to make a claim under the policy. Both Regions Bank and Union Security Life Insurance Company denied the existence of an insurance policy. The Allens filed suit alleging breach of trust, breach of insurance agreement, fraud and misrepresentation, and bad faith. Regions Bank responded by filing a motion to compel arbitration pursuant to a document the Allens signed in 2001 in order to open a demand deposit account with AmSouth Bank. Regions Bank invoked that document’s requirement that the parties arbitrate any dispute that might arise between them. The District Court denied the bank’s motion to compel arbitration because the booklet mailed to the Allens in 2007 did not unambiguously modify the underlying loan agreement. The court held that although an enforceable arbitration clause existed as to deposit accounts, the arbitration clause in the booklet was not applicable to a loan agreement. Regions Bank appealed. Both parties agreed that the Federal Arbitration Act (FAA) applied to the case. Citing Rent-A-Center, West, Inc. v. Jackson, 130 S. Ct. 2772 (2010), the Fifth Circuit stated that two types of validity disputes arise under the FAA: “One type challenges specifically the validity of the agreement to arbitrate,” and “[t]he other challenges the contract as a whole, either on a ground that directly affects the entire agreement (e.g., the agreement was fraudulently induced), or on the ground that the illegality of one of the contract’s provisions renders the whole contract invalid.” (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 444 (2006)). Because Section 2 of the FAA allows arbitration if the “written provision” that mandates the arbitration is not subject to revocation under the usual grounds in law and equity, a court may still require arbitration of a dispute where the arbitration provision itself is not challenged. Additionally, the Fifth Circuit cited the severability rule from Buckeye, stating, “a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.” Meanwhile, where an entire agreement is simply for arbitration, the Fifth Circuit stated a challenge must be to the validity of the specific provision in the arbitration agreement for a court to hear it. The Allens failed to address the validity of the contract and, “the agreement itself, as far as it reached, was never found to be invalid nor was it even challenged as being invalid.” Also, the Allens did not allege the agreement to arbitrate was invalid due to unconscionability or other such defects. Instead, they argued that the way the agreements were written did not lead clearly to the application of the arbitration provision to the consumer loan dispute. According to the Court, their challenge merely addressed the applicability, not the validity of the agreement. Because there was no question that an arbitration agreement existed between the parties, the Fifth Circuit addressed whether the question of arbitrability was for an arbitrator or for a Court to decide. Despite the general rule that a court decides whether there is an agreement to arbitrate a dispute, the issue of arbitrability is for an arbitrator when the evidence clearly demonstrates that was the parties’ agreement. The Fifth Circuit concluded that the parties had clearly intended for the issue of arbitrability to be arbitrated based on the wording of the arbitration provision contained within the booklet mailed by Regions Bank. The Court also concluded that the Allens had accepted the arbitration language contained in the booklet because they continued to use their deposit account and signed signature cards. The Fifth Circuit Court vacated and remanded the lower court’s denial of Regions Bank’s motion to compel arbitration. “Disputing” has been covering the debate: “Who decides arbitrability: courts or arbitrators?” for several years: Last month, we discussed an article written by Allan Dinkoff from Weil Gotshal & Manges LLP which addressed the effect of Rent-A-Center, West, Inc. v. Jackson (case discussed here) on the writing of arbitration clauses here. In June, we discussed the U.S. Supreme decision in Granite Rock v. Teamsters, here. Guest blogger James M. Gaitis discussed Rent-A-Center, West, here, and Professor Alan Scott Rau wrote on the case here. Technorati Tags: law, ADR, arbitration

Texas Bar Journal September 2010 | Volume 73, 8 This issue features an interesting article entitled “What You Always Wanted to Know About Arbitration” written by Scott D. Marrs and Sean P. Milligan. The article seeks to answer five key arbitration questions recently decided by the courts: 1. Can the parties agree that an arbitration award is appealable? In Hall Street Associates, Inc. v. Mattel, Inc., No. 06-989, 552 U.S. 576 (2008), the U.S. Supreme Court held that contractual agreements to expand judicial review in arbitrations governed by the Federal Arbitration Act are prohibited and unenforceable, but left open the possibility that state law might provide a basis for expanded review. 2. Under what circumstances does a party waive its right to arbitrate? The Texas Supreme Court in Perry Homes v. Cull, No. 05-0882, 258 S.W.3d 580 (Tex. 2008), cert. denied 129 S. Ct. 952, utilized a totality of circumstances test when determining whether waiver has occurred. Those factors include: which party invoked arbitration, the length of time the moving party waited prior to invoking arbitration, whether or not the party invoking arbitration was previously aware of the alternative dispute resolution clause, how much activity was related to the merits of the case rather than arbitrability or jurisdiction, the expense and time incurred in litigation, whether or not the moving party had previously opposed arbitration, filed affirmative claims or dispositive motions in the case, whether arbitration would preclude important discovery, whether activity in court would be duplicated in arbitration and the pending trial date, if set. 3. What effect does an unconscionable contract provision within an agreement have on enforceability of the arbitration clause contained therein? In Security Service Federal Credit Union v. Sanders, No. 04-07-00540-CV, 264 S.W.3d 292 (Tex. App 2008) the Court of Appeals of Texas held that an illegal or unenforceable contract provision can be severed and the remainder of the contract may be enforced if intended by the parties. 4. Do arbitrators have the power to compel discovery from non-parties? Although the Second Circuit has stated arbitrators may order a non-party to an arbitration to produce documents so long as that person is called as a witness at the hearing, recent case law has adopted a limited view of an arbitrator’s power to compel discovery from non-parties. 5. Are heirs and beneficiaries bound by a decedent’s arbitration agreement? In the majority of states, including Texas, the answer to this question depends on whether the wrongful death action is an independent or derivative cause of action under state law. In such states, beneficiaries are bound by a decedent’s agreement to arbitrate in a derivative action. You can read the full article here. Technorati Tags: ADR, law, arbitration

The Third Circuit Court of Hawaii reported mid-year statistics for its Foreclosure Mediation Pilot Project (FMPP) in the Summer 2010 Center for Alternative Dispute Resolution Newsletter, ADR Times. Launched in November 2009, the FMPP allows borrower-occupants facing judicial foreclosure to request mediation through the program. Once a request is submitted to the court, the case is then scheduled for a judicial conference in which a judge determines whether to order mediation. As of June 30th, 31 cases qualified for the FMPP, 27 requests for mediation were received and 18 judicial conferences were held. Of those cases, 12 were ordered to mediation, seven mediations were held and four cases reached agreement. Additionally, five cases are currently pending. The project is slated to continue through October 31, 2010. Read the full article here. Technorati Tags: ADR, law, arbitration

By Holly Hayes Over opposition of the New York State’s medical society, last week, Gov. David A. Paterson signed a bill — the New York Palliative Care Information Act — which requires physicians treating patients with a terminal illness to “offer them or their representatives information about prognosis and options for end-of-life care, including aggressive pain management and hospice care as well as the possibilities for further life-sustaining treatment”. See the New York Times article here. A study last week in The New England Journal of Medicine found that among 151 patients newly diagnosed with metastatic lung cancer, those who chose to receive palliative care, or care focused on symptoms, as well as standard cancer therapy reported they had a better quality of life, they experienced less depression, they were less likely to be given aggressive end-of-life care and they lived approximately three months longer than patients who received only cancer treatment. In the August 2 issue of The New Yorker, Atul Gawande, authored an article titled, “Letting Go, What should medicine do when it can’t save your life?” See the full article here. Gawande is a surgeon and a writer, and is a staff member of Brigham and Women’s Hospital, the Dana Farber Cancer Institute, and the New Yorker magazine. Read more about Dr. Gawande here. His article gives riveting, detailed examples of our current approach to end-of-life care in the US. In April, we wrote about being able to say no to costly end-of-life care to improve end-of-life comfort care. See more here. We referenced William Ury’s book, The Power of a Positive No whose preface begins with a discussion of his daughter’s illness and his family’s “long journey through the medical system.” He says, “I realize the process has called on all of the skills I have learned over the years in helping others get to Yes with their negotiation issues. I also realized that, for me personally, the key skill I needed to develop to protect my daughter and our family was saying No.” Everyone says no, the difference for Ury was that “my Nos needed to be nice.” The New York law appears to be one step in the process of promoting open discussion about care options between physicians and patients. According to one palliative care expert, the law is not enough. Dr. Diane E. Meier, director of the Hertzberg Palliative Care Institute at Mount Sinai School of Medicine in New York, said in an interview that the law does not help doctors and nurses acquire the expertise they need to hold meaningful end-of-life discussions with their patients. To increase competency in palliative care, she said, courses in medical and nursing schools and a continuing-education requirement for practicing physicians are essential. “Doctors need to know how to identify when patients are on the decline, be able to initiate conversations with patients and/or family members, discuss what to expect in the future and the pros and cons of alternative care options, and know how to provide support as a patient’s illness progresses,” Dr. Meier said. Perhaps there is a role for dispute resolution experts in helping our nation’s caregivers develop “the expertise they need to hold meaningful end-of-life discussions with their patients”. We welcome your comments 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.