The Fourteenth Court of Appeals of Texas held that a trial court abused its discretion in denying a motion to compel arbitration. I. Background In Pham v. Letney, no. 14-09-00387-CV (Tex.App.-Houston [14th Dist.] March 4, 2010) Shelly Letney hired the law firm of Smith & Garg, L.L.C. to pursue her personal injury claims she allegedly suffered in an automobile accident. Sarita Garg is a named partner in the firm and Steven Tuan Pham, an associate with the firm, was at least partially responsible for handling Letney’s case. The attorney-client representation agreement between Letney and Smith & Garg, L.L.C. contained the following arbitration provision: ARBITRATION Any and all disputes, controversies, claims or demands arising out of or relating to this Agreement or any provision hereof, whether in contract, tort or otherwise, at law or in equity, for damages or any other relief, shall be resolved by binding arbitration pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association. Any such arbitration proceeding shall be conducted in Harris County, Texas pursuant to the substantive federal laws established by the Federal Arbitration Act. Any party to any ward [sic] rendered in such arbitration proceeding may seek a judgment upon the award and that judgment may be entered by any federal or state court in Montgomery County, Texas [sic] having jurisdiction. Letney sued Pham, Garg, and Smith & Garg, L.L.C., alleging legal malpractice and other claims based on a failure to timely file suit for Letney’s alleged personal injuries. The defendants filed a motion to compel arbitration pursuant to the attorney-client agreement and the trial court denied the motion without stating the basis for the holding. II. Majority Opinion The Fourteenth Court of Appeals first determined whether the issues are properly raised in a direct interlocutory appeal or in a petition for writ of mandamus. The court explained that “[i]t is well-settled that when a trial court denies arbitration under the Texas Arbitration Act (“TAA”), the order is subject to interlocutory appeal, whereas when a court denies arbitration under the FAA, relief must be sought in a petition for writ of mandamus.” Because the arbitration provision in the contract explicitly designated arbitration pursuant to the Federal Arbitration Act (“FAA”), the court dismissed Phan’s interlocutory appeal and considered his petition for writ of mandamus. Then, the court stated the test a party seeking to compel arbitration must establish: (a) the existence of an agreement to arbitrate and (b) that the claims fall within the scope of that agreement. The court noted that Letney acknowledged that she had signed the representation agreement and does not contest that the allegations are within the scope of that provision. Then, the court began discussing Letney’s four defenses against enforcement of the arbitration provision. (1) Letney cites TAA section 171.002, which prohibits arbitration agreements in respect to claims for personal injuries unless each party to the agreement receives advice of counsel and the agreement is in writing and signed by each party and each party’s attorney. Tex. Civ. Prac. & Rem. Code § 171.002(a)(3), (c). However, the court stated that “[e]ven assuming that the TAA section in question can apply to an arbitration agreement selecting FAA procedures, it would not apply in the circumstances presented by this case because Letney has alleged legal malpractice in this lawsuit and not personal injury.” (2) Letney argues that “arbitration pursuant to the FAA would be improper, despite the selection of FAA arbitration in the arbitration clause, because the contract in question, for legal services in Texas concerning a Texas-based claim, had no impact on interstate commerce.” But the court was not persuaded because here, the arbitration provision clearly specified arbitration under the FAA. The court said that “the majority of courts that have examined this issue have upheld the right of the parties to an arbitration agreement to choose a particular arbitration scheme (state or federal) to govern any resulting arbitration under the agreement.” (3) Letney claims that the arbitration provision was unconscionable and therefore, invalid. Letney cited Chief Justice Hardberger’s dissent in Henry v. Gonzalez, 18 S.W.3d 684 (Tex. App.—San Antonio 2000, pet. dism’d by agr.). In Henry, Justice Hardberge argued that “arbitration clauses between attorney and client should be held against public policy in the absence of additional protections for the client.” However, the court said that “we believe that such policy arguments are better directed to the legislature.” Letney also cites an opinion by the Texas Ethics Commission in which the Commission suggested that it would be permissible under the Texas Disciplinary Rules of Professional Conduct to include an arbitration clause in an attorney-client contract only if the client was made aware of the advantages and disadvantages of arbitration and had sufficient information to make an informed decision as to whether to include the clause. See Op. Tex. Ethics Comm’n No. 586 (2008). However, the court responded that “Opinion No. 586 did not impose any restrictions on attorney-client arbitration clauses because (1) such opinions are advisory at best, (2) the commission expressly declined in the opinion to opine on the substantive law concerning arbitration clause enforceability, and (3) substantive law does not include any such restrictions.” (4) Finally, Letney cites the Texas Disciplinary Rule of Professional Conduct 1.08(g), which provides that “[a] lawyer shall not make an agreement prospectively limiting the lawyer’s liability to a client for malpractice unless permitted by law and the client is independently represented in making the agreement . . . .” The court, however, stated that an agreement to arbitrate does not limit a party’s liability, but “it merely denominates a procedure for determining that liability.” The court concluded that none Letney’s arguments have merit, dismissed the interlocutory appeal, and conditionally granted the writ of mandamus. III. Dissenting Opinion Justice Charles Seymore filed a dissenting opinion on this case (pdf). In the opinion, Justice Seymore expressed his concern for mandatory arbitration provisions in attorney-client agreements stating that: I have no disagreement with the majority’s […]

By Holly Hayes On Feb. 23, the American Medical Association and 76 other medical societies wrote a letter to President Barack Obama and congressional leaders asking them to adopt legislation to reduce unnecessary medical lawsuits. “‘Defensive medical procedures, prompted by the threat of litigation, add substantial costs for individuals, private and public payers,” the letter stated (read the letter here). At President Obama’s health care summit on Feb. 25, Dr. Coburn, an obstetrician-gynecologist cited estimates by Thompson-Reuters, that the “U.S. health system wastes at least $600 billion a year because of poorly coordinated care, fraud, frivolous lawsuits and a lack of preventive care.” Right after the summit, on March 3, President Obama outlined a revised version of his comprehensive health care reform proposal (read article by the American Medical News here) . The plan includes a section specifically on medical liability calling for expanding medical liability alternatives by adding $50 million to a $23 million state pilot project managed by Health and Human Services Secretary Kathleen Sebelius (see our post on this pilot project here ). We welcome your comments on the continuing discussion of health care reform and medical liability. Technorati Tags: Healthcare, ADR 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.

We came across an interesting article from the landmark symposium Transatlantic Perspectives on Alternative Dispute Resolution. The piece is entitled Teaching Comparative Perspectives in Mediation: Some Preliminary Reflections, 81 St. John’s L. Rev. 259 (2007) and was written by professor Jacqueline Nolan-Haley (pictured right). Here is an excerpt: Introduction Mediation is no longer the stepchild of international dispute resolution practice. Scholars and practitioners recognize its enormous potential as a confidential, cost-saving, time-saving, relationship-enhancing process that gives control over disputes to the affected parties and often results in greater levels of satisfaction than litigation. Whether its appeal has peaked because of growing disenchantment with commercial arbitration or the perception that international arbitration has become like U.S. litigation, 1 mediation is beginning to blossom on the international dispute resolution landscape.The growing interest in mediation at the international level is reflected in numerous international and regional organizations, laws and protocols. Notable examples include organizations such as the Commercial Arbitration and Mediation Centre of the Americas (“CAMCA”), 2 the CPR International Institute for Conflict Prevention & Resolution, 3 and the International Chamber of Commerce (“ICC”) that offer rules and procedures to resolve private commercial disputes through mediation. The World Trade Organization’s (“WTO”) dispute settlement system offers mediation as one method of resolving trade disputes between members. 4 And, a primary example of legislation is the Model Law on International Commercial Conciliation that was developed by the United Nations Commission on International Trade Law (“UNCITRAL”). 5 The Model Law, which was recommended by the United Nations for adoption by member states in 2002, suggests an international consensus on the value of mediation as a mainstream method of resolving disputes. 6While mediation programs are developing rapidly across the globe, given the transatlantic focus of this conference Transatlantic Perspectives on ADR-and its London location, it is useful to consider some recent examples of mediation’s growth in Europe. In 2002, the European Commission issued a Green Paper that identified ADR as a “political priority” for all “European Union institutions, whose task it is to promote these alternative techniques, to ensure an environment propitious to their development and to do what it can to guarantee quality.”7 The purpose of the paper was to encourage use of ADR as a means of increasing access to justice in cross-border disputes.8 The paper initiated a wide-spread consultation with Member States and interested parties on possible measures to promote the use of mediation.9 Read the full article here. More articles by Professor Nolan-Haley are here. Technorati Tags: ADR, law, arbitration

By Holly Hayes The New York Times posted last week an interview with Dr. Howard Brody (pictured left), professor of family medicine and director of the Institute for the Medical Humanities at the University of Texas Medical Branch in Galveston, discussing a proposal for health care reform involving physicians. Physicians, Dr. Brody says, are not “innocent bystanders” to increasing health care costs but have made little effort to limit future medical costs. In an editorial in The New England Journal of Medicine, he writes “If physicians seized the moral high ground, we just might astonish enough other people to change the entire reform debate for the better.” The New York Times spoke with Dr. Brody about his “Top Five” solution: Q. You write that doctors have an ethical responsibility to advocate health care reform. Why? A. Doctors have two responsibilities. First, they have a moral duty as an individual advocate. A doctor has a responsibility to his or her individual patients to make them healthier and to help them live longer. But doctors have a second moral duty: they have an obligation to the general public to be prudent stewards of scarce resources. Doctors only get about 10 percent of health care costs in their pockets, but they control about 80 percent. That isn’t our money — it’s someone else’s — and the public has entrusted us to spend it as wisely as possible. Q. How does your “Top Five” solution work? A. The basic idea is that each specialty would decide on the top five procedures or diagnostic studies that are done commonly but only really help a small fraction of patients. These are things like arthroscopy for osteoarthritis of the knee or MRI’s and CAT scans, all of which are massively overused, not because they help but because of our enthusiasm regarding high technology. Once each specialty has gone through the research evidence and decided on its “Top Five,” the respective professional organizations would take a public stand, issuing guidelines and recommendations against overuse of those “Top Five” procedures or studies. By taking a public stand and making it harder for individual doctors to say, “Oh, I know better,” we could build real momentum for cost containment. And we would ultimately all benefit because we don’t need all that technology. You can still be as healthy without it. A physician-led effort to determine guidelines and recommendations against overuse of the “Top Five” procedures or studies could have a tremendous impact on curtailing future medical costs. We suggest that the process outlined by Dr. Brody could benefit from applying conflict resolution techniques. For example, we recently posted a Four-step Approach to Problem-solving used by the program for Health Care Negotiation and Conflict Resolution at Harvard. This approach could be applied to the “Top Five” process: A Four-step Approach to Problem-solving Four negotiation steps developed by the Program for Health Care Negotiation and Conflict Resolution guide minor and major negotiations in health care. The structured multidimensional problem-solving process is called “Walk in the Woods,” after a famous story in which international negotiators at loggerheads over a nuclear arms treaty went for a walk in the woods near Geneva and discovered common interests that led to new solutions. Step one: self interests. Each participant articulates his or her view of key problems, issues, and options. They are encouraged to actively listen, question, and interact with one another. Step two: enlarged interests. The participants reframe their understanding of current problems and possible options with a wider perspective, based on the integrative listening and confidence-building that occurred in step one. Step three: enlightened interests. The group is ready to engage in innovative thinking and problem-solving, generating ideas and perspectives that had not previously been considered. Step four: aligned interests. Participants build common ground perspectives, priorities, action items, agreement, or plans for moving forward. Depending on the scope of the intended objectives, at this point they recognize the tangible contributions and opportunities accomplished through the meeting. We invite your comments on this topic. Technorati Tags: Healthcare, ADR 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.