Recent opinions from the U.S. Supreme Court, the Texas Supreme Court, and the U.S. Court of Appeals for the Fifth Circuit demonstrate that it is quite possible for an agreement to arbitrate to exist in the absence of an actual written agreement signed by both purportedly bound parties to the litigation. I. U.S. Supreme Court In March 2009, the U.S. Supreme Court held in Arthur Anderson that a non-party to an arbitration agreement could appeal a trial court ruling that rejected the third party’s motion to compel arbitration. Arthur Anderson LLP v. Carlisle, 129 S.Ct. 1896 (2009). (post available here) II. Texas Supreme Court Texas courts have employed different and unusual theories in order to find that an agreement to arbitrate exists in the absence of a traditional written agreement: direct-benefits estoppel, incorporation by reference, assumption, agency, alter ego, and third-party beneficiary. In re Kellogg Brown & Root, 166 S.W.3d 732 (Tex. 2005). These theories stem from contract law, since an agreement to arbitrate is a contract. In Labatt, the Texas Supreme Court resolved the issue of whether non-signatories to an arbitration agreement should be compelled to arbitrate claims when the decedent’s claims would have to be arbitrated. In re Labatt Food Service, L.P., 279 S.W.3d 640 (Tex. 2009). Plaintiffs in this case are family members who brought a wrongful death action against the employer Labatt Food Service, L.P. The Texas Supreme Court stated that “is well established that statutory wrongful death beneficiaries’ claims place them [the family members] in the exact ‘legal shoes’ of the decedent, and they are subject to the same defenses to which the decedent’s claims would have been subject.” The court reasoned that if the employee had not died from his injuries, his claims would have been arbitrated. Similarly, in Jindal, the Texas Supreme Court held that an arbitration agreement between a decedent and his employer required the non-signatories beneficiaries to arbitrate their claims against the employer. In re Jindal Saw Ltd., 2009 WL 490082, 52 Tex. Sup. Ct. J. 407 (Tex. Feb. 27, 2009) III. Fifth Circuit Finally, the Fifth Circuit held in Graves that non-signatories plaintiffs were bound by the arbitration agreement between the decedent and his employer. Plaintiffs in Graves are the surviving relatives of an employee of defendant JV Industrial Companies, who died in a work-related accident at a BP facility in Texas. Graves v. BP America, Inc., 568 F.3d 221 (5th Cir. 2009). (post available here) Technorati Tags: law, ADR, arbitration

by Holly Hayes In light of the subprime mortgage crisis, several states have adopted mediation programs to assist homeowners and lenders reach a solution to a mortgage foreclosure action. Keith Seat, at Mediate.com posted recently an update on foreclosure mediation across the United States. Highlights include the introduction of federal legislation that would encourage state and local governments to create strong foreclosure mediation programs. The Preserving Homes and Communities Act of 2009, (S. 1731 and Status) calls for federal matching funds of $80 million for mandatory mediation programs. [Update:] In addition, on December 18, the Foreclosure Mandatory Mediation Act of 2009 was introduced. The bill would require lenders of loans with Federal guarantees or Federal insurance to consent to mandatory mediation. (S. 2912 and Status) Connecticut, which made foreclosure mediation mandatory in July, is mediating less than 40% of the eligible foreclosure cases. The low percentage of mediations is because the program only applies to homeowners who file an appearance in court. When mediation does occur, 75% of cases are settled. In 62% of the cases, homeowners stayed in their homes and 13% moved without foreclosure. In the last three months, about 2,000 cases in Connecticut have been mediated with a team of 24 full-time mediators. Indiana passed legislation that requires creditors to inform homeowners of their right to a settlement conference prior to foreclosure. The Indiana Supreme Court and a number of other government and non-profit agencies completed a training program for over 1,000 judges, attorneys and mediators in how to handle foreclosure cases. In Nevada, workshops are being held to teach homeowners to effectively represent themselves so they can get the most out of a foreclosure mediation. On the other hand, the National Consumer Law Center (NCLC) just released a report claiming that existing foreclosure mediation programs do not place enough obligations on mortgage lenders to fully participate in the mediation process. The report looked at 25 foreclosure mediation programs around the country, including court-related mediation programs in Connecticut, Florida, Indiana, Kentucky, Maine, Nevada, New Jersey, Ohio, and Pennsylvania. The study found that programs are often lacking mandatory rules and that programs with minimal rules fail to impose sanctions for non-compliance. For example, the programs do not require lenders to provide communication substantiating a right to foreclose, they do not mandate consideration of loan modification alternatives and many set procedural barriers that restrict a large numbers of homeowners from participating in mediation. Geoffry Walsh, staff attorney for the NCLC and author of the study states that “if the programs continue to demand little or no accountability from servicers, they will likely go the way of other efforts to control foreclosures that relied on voluntary compliance by the lending industry.” The report suggests a variety of ways to engage lenders in the mediation process, including: requiring lenders to participate in good faith, documenting and enforcing compliance with all participation obligations and allowing requests for mediation to be made up to the time of a foreclosure sale. Technorati Tags: Healthcare, ADR, law, mediation 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.

To follow up on our earlier post, here is an article by Automotive News: Neil Roland Automotive News December 17, 2009 WASHINGTON — President Barack Obama signed legislation that would give rejected General Motors Co. and Chrysler Group dealers access to neutral arbitration if they want to be reinstated, kicking off a a six-and-a-half months arbitration process. GM and Chrysler now have 30 days to send letters to the owners of about 2,150 rejected dealerships informing them of their rights under the new law and spelling out the reasons that their franchise agreements were terminated. With Obama’s signature, the eliminated dealerships have 40 days to give notice that they intend to seek arbitration. Arbitration must be completed within six months, and dealerships that win must receive a letter of intent from the automakers within another 14 business days. The legislation that Obama signed was a $446 billion spending bill that contained the dealer-arbitration provisions spearheaded by Rep. Steny Hoyer, D-Md., the House majority leader, and Sen. Dick Durbin, D-Ill., the assistant Senate majority leader. Hoyer and Durbin acted this month after GM and Chrysler broke off settlement talks and announced plans to create neutral arbitration applying the original criteria they used to mark dealerships for termination. The new law contains criteria more favorable to dealers than those envisioned by GM and Chrysler.

In 2009, the 81st Regular Session of the Texas Legislation adjourned on June 1. Following is a summary of some bills related to alternative dispute resolution filed during the session. Bills that passed: H.B. 2256. The bill relates to mediation of out-of-network health benefit claim disputes concerning enrollees, facility-based physicians, and certain health benefit plans. Here are the bill’s history and analysis. Posts by Holly Hayes discussing this bill are here and here (with commentary by Victoria Pynchon and Michael Curry). S.B. 1650, authored by Senator Duncan (R-Lubbock), would grant Texas appellate courts jurisdiction over certain interlocutory appeals arising under the FAA. Here are the bill’s history and analysis. Find a post by Don Cruse here. H.B. 1083. The bill, authored by Rep. Gary Elkins, states that “Except as provided by agreement of the parties, a court may not order mediation in an action that is subject to the Federal Arbitration Act (9 U.S.C. Sections 1-16).” Here are the bill’s history and analysis. Also, a guest-post by Audrey L. Maness from Weil, Gotshal & Manges is here. Bills that did not pass: S.B. 222, authored by Senator Royce West, would amend the Texas Arbitration Act to ban pre-dispute arbitration in employment, consumer, and franchise contracts. In addition, it would prohibit arbitration of civil right claims. The bill’s history is here. H.B. 2139. Authored by Rep. McClendon, the bill establishes a victim-offender pretrial mediation program for first-time offenders. The bill’s history is here. H.B. 2095. Filed by Rep. Farrar, relating to the regulation of claims against residential home builders. This bill would prohibit charging homeowners with fees in connection with a state-sponsored inspection or dispute resolution process and arbitration required under the same title. The bills’ history is here. H.B. 2896. Filed by Rep. Leibowitz, relating to forms to be used by builders in contracts for the sale or construction of a new home. This bill provides that a contract form requiring the parties to agree to binding arbitration can not be adopted. The bill’s history is here. H.B. 3426. Filed by Rep. Hernandez, relating to the notice required by certain mortgage servicers before foreclosing on real property. This bill provides mediation rules for foreclosure disputes. The bill’s history is here. H.B. 3482. Filed by Rep. Coleman, relating to the notice required by mortgage servicers before foreclosing on real property. This bill is similar to H.B. 3426. The bill’s history is here. S.B. 1475. Filed by Senators Ellis, Van de Putte, and Watson, relating to the notice required by mortgage servicers before foreclosing on real property. This bill is identical to H.B. 3426 and similar to H.B. 3482. The bill’s history is here. H.B. 2696 would prohibit one contracting party from requiring the other party to agree to arbitration as a condition of the contract. It also provides that an agreement is unconscionable if its enforceability would violate a right protected by either the U.S. or Texas Constitutions. In addition, an agreement to arbitrate must be displayed prominently in 12-point bold type. The bill’s history is here. S.B. 556 would amend the Insurance Code by adding a clause to provide for binding arbitration agreements within the context of health care contracts with physicians and health care providers. The bill’s history is here. H.B. 1635 would abolish the Texas Residential Construction Commission and provides for the phasing out of arbitration claims. The bill’s history is here. H.B. 2539 relates to a disaster recovery insurance claims mediation program. The bill’s history is here. Technorati Tags: law, ADR, arbitration