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
Continue reading...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
Continue reading...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
Continue reading...The Eastern District Court of California has held a class action arbitration agreement waiver unenforceable and refused to compel arbitration against a former employee seeking class action status. In Mathias v. Rent-A-Center, Inc., No. S-10-1476 (E.D. Cal. Sept. 15, 2010), Ryan Mathias, a former Assistant Manager of a Rent-A-Center (RAC) located in California filed a class action lawsuit in California state court which alleged eight claims related to his employment with RAC, including claims related to unpaid overtime and wages. RAC removed the case to federal court and filed a motion to compel arbitration. RAC relied on an arbitration clause contained in an employment agreement between Mathias and RAC that also included a nonseverable class action waiver provision. While both parties agreed that the Federal Arbitration Act applied, the opinion ultimately hinged on the California Supreme Court’s decision in Gentry v. Sup. Ct., 42 Cal.4th 443 (2008). In Gentry, the California Supreme Court held that a class action waiver may be unenforceable in certain circumstances when it performs as an exculpatory clause. Gentry also stated that wage, hour and overtime cases would similarly have an exculpatory effect which would “frequently if not invariably,” undermine the unwaivable statutory right to overtime pay in California. After noting that it could not categorically hold all class action waivers unenforceable per se in overtime actions, the Gentry court held that a court must determine whether a waiver is in fact exculpatory by considering a number of specific factors. After considering the factors, if a court determines that class proceedings “are significantly more effective and practical and that disallowance of such proceedings will likely lead to less comprehensive enforcement, ‘it must invalidate the class arbitration waiver. . .’” The Gentry court held that a class waiver could also be invalid if it was found to be both procedurally and substantively unconscionable under California law. In support of his case, Mathias argued that his individual recovery was likely to be modest based on his salary at termination, retaliation against members of the putative class was likely and individual class members were unlikely to be aware of their rights. RAC responded by arguing the recent Supreme Court holding in Stolt-Nielsen v. Animalfeeds Int’l, Inc., 130 S.Ct. 1758 (2010) preempted the decision in Gentry. The Eastern District Court was not persuaded by RAC, however, and noted that the decision in Stolt-Nielsen and the subsequent court of appeals opinions interpreting it added weight to its decision to apply California law to evaluate the class action waiver at issue. According to the Eastern District: Nowhere in the opinion did the Court even infer that state law regarding contract interpretation is preempted where the rule of interpretation is based upon policy concerns. In fact, the court specifically held the arbitration panel should rely on state contract law in determining whether to impose class arbitration… This court has not found any decisions of the courts of appeals that interpret Stolt-Nielsen as holding that the FAA preempts state rules of contract interpretation derived from public policy concerns. For this reason, the court applies California law to evaluate the class action waiver at issue in this case. The California court found Mathias successfully demonstrated that a waiver would undermine a statutory right such that the waiver would be exculpatory under the factors set forth in Gentry. Because the arbitration agreement in the employment contract stated the class waiver was not severable, the court held the entire arbitration agreement unenforceable and denied RAC’s motion to compel arbitration. Disputing addressed the recent decision in Stolt-Nielsen v. Animalfeeds Int’l, Inc. many times since it was decided: We blogged on the case itself here; In Professor Stipanowich’s guest post here; In Professor Strong’s guest post here and In an article entitled “Unresolved Questions in the Wake of the U.S. Supreme Court’s Class Arbitration Ruling in Stolt-Nielsen v. AnimalFeeds International,” by Robert E. Crotty here. Technorati Tags: law, ADR, arbitration
Continue reading...Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.
Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.