Via the Adjunct Law Prof Blog, we learned that a new coalition, the Business Leaders for a Fair Economy is speaking out in support of the Employee Free Choice Act of 2009. The coalition released this ad, which claims that 1,000 business leaders agree the Employee Free Choice Act is key to restoring the country’s economy. The Act ( Senate version: S. 560 and Status; House version: H.R. 1409 and Status ) is currently in the U.S. Congress and as it relates to dispute resolution, it would amend the National Labor Relations Act to require first mediation and then binding arbitration if both parties are unable to reach an agreement within a certain time frame. As we blogged recently, George McGovern has openly opposed the passage of the Act. Let us know your thoughts about the Employee Free Choice Act!
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arbitration, ADR, law, legislation, Employee Free Choice Act of 2009
Within President Obama’s proposal to reform the financial services sector, A New Foundation: Rebuilding Financial Supervision and Regulation, there is a provision that directs the U.S. Securities and Exchange Commission (SEC) to study the use of mandatory arbitration clauses in investor contracts. Check out Professor Barbara Black’s discussion of the proposal in her post First Look at the Administration’s Financial Regulatory Reform and the Wall Street Journal’s post The Beginning of the End of Mandatory Arbitration? We welcome your commentary!
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Need CLE Credits? Mark your calendars!
The American Bar Association Section of Litigation will hold a live teleconference and webcast on July 14, 2009 titled “Deal or No Deal: Improving the Odds of Successful Mediation.” Reinsurance and Insurance expert Katherine Billingham from KB ReSolutions, Inc. and Randall Kiser from DecisionSet will present at the event. Randall’s article Lets Not Make a Deal: An Empirical Study of Decision Making in Unsuccessful Settlement Negotiations was featured recently in the New York Times.
Donald R. Philbin, Jr., friend of this blog and adjunct professor at Pepperdine’s Straus Institute for Dispute Resolution will also speak at the event. Here are two excellent papers written by Don: The One Minute Manager Prepares for Mediation: A Multidisciplinary Approach to Negotiation Preparation published in the Harvard Negotiation Law Review and Deal or No Deal? or Perhaps a Better Deal? The Impact of Improved Information published by CPR.
Find out more about the event here.
By Holly Hayes
Texas House Bill 2256 was signed into law on June 19, 2009 and is effective immediately. The bill provides a procedure for mediation of out-of-network health benefit claim disputes. The law now gives patients the option to mediate when they are “balance-billed” by their insurance company for services provided by out-of-network facility-based physicians like radiologists, pathologists, and neonatologists. Balance billing occurs when a physician bills a patient for the difference between what the physician charges for a service and what an insurer pays the physician for that service. When a physician is not in-network for an insurer, there is no contracted payment rate that the physician has agreed to accept from the insurer so the insurer can pay what is deemed appropriate and the patient is billed for the difference.
The Problem
Patients are not always informed when a facility-based physician is out-of-network. Even though services are provided at an in-network facility, patients may be responsible for out-of-network charges for facility-based physicians. For example, a mother gives birth in the hospital and the next day a neonatologist visits the baby before both are discharged home. If the neonatologist is not part of the hospital preferred provider plan, the mother will be billed for the balance of the amount not covered by insurance. It is unlikely the mother would even consider that the neonatologist visiting her baby - in the hospital - is not included in the hospital’s preferred provider plan.
Facility-based physicians may not be part of a hospital’s preferred provider plan for a variety of reasons. In testimony for the House Insurance Committee on House Bill 2256 on March 24, 2009, William Hinchey MD, Past President of the Texas Medical Association (TMA), outlined some of the possibilities. Some health plans refuse to acknowledge facility-based provider services as reimbursable services. Sometimes a health plan will sign an exclusive arrangement with a national provider that operates in a different city from the hospital. Reductions in fee schedules, absent negotiation with the facility-based physician, leave the physician with no recourse but to withdraw from the preferred provider plan.
The Solution
HB 2256 gives patients the option to mediate when they are balance-billed. The law allows enrolled members of a preferred provider plan - or a Texas employee health benefit plan that is not a Health Maintenance Organization (HMO) - to request mediation for an out-of-network claim settlement if two criteria are met. First, the enrolled was responsible for a payment greater than $500 to a facility-based physician after deductibles, co-payments and coinsurance. Second, the facility-based physician provided the service in a hospital that was contracted with the health plan administrator or in a preferred provider hospital.
The new law has implications for healthcare facilities. Healthcare facilities providing facility-based physician services that are out-of-network to a patient are required to notify the patient of the mandatory mediation procedure. Providers are also required to give patients a list of all facility-based physicians who have privileges at the facility and inform patients that these physicians could bill them for amounts not paid by their insurer.
HB 2256 has implications for insurance companies as well. The law requires the insurance commission to adopt rules for an insurer to submit documentation to the Texas Department of Insurance (TDI). Insurers must submit the methods used to compute out-of-network reimbursements and the effect these methods could have on the insured’s out-of-pocket costs.
If a patient requests mediation for an out-of-network claim settlement, a mediator agreed upon by all parties (or appointed by the chief administrative law judge by random assignment) would conduct the mediation. Each party would have an opportunity to state their position. The mediation would consider three issues. First, whether the amount charged by the facility-based physician was excessive. Second, whether the amount paid by the insurer for the service was the usual and customary rate (UCR) or unreasonably low. Third, whether the amount for which the enrolled is to be responsible is excessive.
In conclusion, HB 2256 now gives patients the option to mediate when they are balance-billed by a facility-based physician. In addition, the bill requires healthcare providers to take steps to inform patients that they may be responsible for facility-based physician fees. Insurance companies will be required to provide information on how physician reimbursement is determined and any effects this may have on a patient. As a result of HB 2256, patients should now be better informed and will have the option of mediating if they are balance-billed.
Holly Hayes is a mediator at Karl Bayer, Dispute Resolution Experts 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.
Tags: H.B. 2256, Texas Legislation
By Audrey L. Maness
On June 19, 2009, Texas House Bill 1083 was signed into law. The new provision, effective immediately, prevents courts from ordering mediation in cases subject to the Federal Arbitration Act (excepting cases where the parties have agreed otherwise). The bill, which passed both the House and the Senate without amendment, applies to all actions commencing on or after June 19th.
What does this mean for future Texas cases involving the FAA? Fewer reversals, for one. H.B. 1083 codifies In re Heritage Building Systems, Inc., 185 S.W.3d 539 (Tex. App.—Beaumont 2006, no pet.). Though the FAA applied to the claims in that case, the trial court ordered the parties to mediate, citing Texas’s policy in favor of settlement. The appellate court reversed, determining that mediation would result in additional time and expense, and thus frustrate the expectations of the parties and the federal mandate that a case be ordered “to proceed to arbitration in accordance with the terms of the agreement.” Id. at 542 (quoting 9 U.S.C. § 4). (Note that though this new law is only prospective – as it should be – because of In re Heritage, the same rule will apply to pending cases.) This law has the same effect as the holding in In re Heritage, but is applicable state-wide.
But the new law will also (likely) result in more litigation. The language of H.B. 1083 is sweeping, covering any action subject to the FAA. Reality is more nuanced, however. Courts regularly deal with cases where some claims are subject to the FAA and others are not. See, e.g., United States v. Medica-Rents Co., 2006 WL 3635416 (N.D. Tex. 2006) (referring the remaining attorneys’ fees question to mediation). What is a court to do when the law requires that mediation be barred as to the entire action? Truth be told, it is unlikely that courts will adopt this wholesale – though literal – interpretation. Rather, one would expect that courts will interpret “action” to mean “claims” or “part of an action.” Such an interpretation would make the law consistent with both the FAA and Texas’s pro-mediation policies.
Though the courts’ treatment of this law remains to be seen, we expect that courts will attempt to harmonize this state law – which, interestingly, codifies federal preemption principles – with the FAA and related state policies.
Audrey L. Maness is an associate at the Houston office of Weil, Gotshal & Manges, LLP. Audrey holds a B.S. in Economics from Central Michigan University and a J.D. from Pepperdine University. She can be reached at: audrey.maness@weil.com.
Tags: H.B. 1083, Texas Legislation
On May 21, 2009 the Loree Reinsurance and Arbitration Law Forum and Disputing announced the formation of a LinkedIn Commercial and Industry Arbitration and Mediation Group. We are pleased to share with you that the group has since grown to 154 members. Discussions have been lively, the group is internationally and professionally diverse, and group members have access to several ADR blogs, as well as articles posted by other group members. It is an excellent networking and learning opportunity for anyone interested in commercial and industry ADR.
We welcome new members. Persons who should consider joining this group include arbitrators; mediators; in-house and outside counsel; law professors; dispute-resolution consultants; members of ADR organizations; business entity representatives and principals whose day-to-day responsibilities include dispute resolution; and law students and other students of commercial and industry ADR.
If you are already a member of LinkedIn, please click here to apply for membership in the Group. If you are not a LinkedIn member, click here, and you will be guided through the process of creating a LindedIn profile. Joining LinkedIn is free, as is joining the group.
We hope you’ll join us and participate in the interesting discussions!
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arbitration, ADR, law, Linkedin, Commercial and Industry Arbitration and Mediation Group
Tags: Linkedin
[Ed. note: This case is a bit old, but an important one. It somehow got lost in the pile of papers sitting on my desk. Thanks to San Antonio arbitrator and mediator Don Philbin for bringing this case to our attention back in April. ]
The United States District Court for the Northern District of Texas held that an arbitration clause in Blockbuster’s Online User Agreement is illusory, thus, unenforceable and denied Blockbuster’s motion to compel arbitration in a class-action privacy suit.
In Harris v. Blockbuster, Inc., No. 3:09-cv-217-M (N.D. Tex. Apr. 15, 2009), Harris is a customer of Blockbuster’s Online movie rental service. Blockbuster’s “Terms and Conditions” provision in the User Agreement includes an arbitration clause that states that “[a]ll claims, disputes or controversies . . . will be referred to and determined by binding arbitration.” The agreement also purports to waive the right to commence a class-action suit. In order to join the movie rental service, customers were required to click on a box certifying that they had read and agreed to Blockbuster’s Terms and Conditions. The User Agreement also includes the following clause:
Blockbuster may at any time, and at its sole discretion, modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice. Such modifications will be effective immediately upon posting. You agree to review these Terms and Conditions of Use periodically and your continued use of this Site following such modifications will indicate your acceptance of these modified Terms and Conditions of Use. If you do not agree to any modification of these Terms and Conditions of Use, you must immediately stop using this Site.
On the other hand, Blockbuster has an agreement with Facebook, in which Facebook displays Blockbuster’s customers movie rental choices in the customers’ Facebook profile and then broadcasts the rental choice to the customers’ Facebook “friends.” Harris filed a class-action lawsuit claiming that the release of the movie rental records by Blockbuster violates the Video Privacy Protection Act, which prohibits a videotape service from providing personal identifiable information without the customer’s consent. The Act provides for liquidated damages of $2,500 for each violation. Blockbuster filed a motion to compel arbitration.
Addressing the plaintiffs allegations that the arbitration provision is unenforceable because it is illusory (not supported by consideration), the court highlighted the legal standard articulated by the Fifth Circuit in Morrison v. Amway Corp. 517 F.3d 248 (5th Cir. 2008);
The Morrison court held that the provision was illusory because “[t]here is no express exemption of the arbitration provisions from Amway’s ability to unilaterally modify all rules, and the only express limitation on that unilateral right is published notice. While it is inferable that an amendment thus unilaterally made by Amway to the arbitration provision would not become effective until published, there is nothing to suggest that once published the amendment would be inapplicable to disputes arising, or arising out of events occurring, before such publication.
After discussing Morrison at length, the court held that Blockbuster’s arbitration agreement is illusory because Blockbuster has sole discretion to unilaterally amend the arbitration provision and the arbitration agreement contains no clause limiting the application of the amendment to disputes occurring after the date of the amendment.
Finally, because the court concluded that the arbitration provision is illusory, the court did not discuss the issue of unconscionability. Accordingly, the court denied Blockbuster’s motion to compel arbitration.
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arbitration, ADR, law, Harris v. Blockbuster
Tags: Blockbuster, illusory agreement
The One Hundred Eleventh United States Congress began on January 3, 2009 and will last till January 3, 2011. Following is a summary of some alternative dispute resolution bills currently being considered during this session. Click on the bill number for its text and on the status link to find the bill’s most recent legislative action. Stay tuned to Disputing for more legislative updates!
- The Arbitration Fairness Act of 2009 would ban mandatory pre-dispute arbitration in employment, consumer, and franchise contracts. Senate version: S. 931 and Status. House version: H.R. 1020 and Status.
- The Employee Free Choice Act of 2009 would amend the National Labor Relations Act to require first mediation and then binding arbitration if both parties are unable to reach an agreement within a certain time frame. Senate version: S. 560 and Status. House version: H.R. 1409 and Status.
- The Payday Loan Reform Act of 2009 would amend the Truth in Lending Act to establish additional payday loan requirements to protect consumers. This bill prohibits a mandatory arbitration clause that is “oppressive, unfair, unconscionable, or substantially in derogation of the rights of consumers.” H.R. 1214 and Status.
- The Fairness in Nursing Home Arbitration Act of 2009 would render pre-dispute arbitration clauses in nursing home contracts unenforceable. S. 512 and Status.
- The Mortgage Reform and Anti-Predatory Lending Act of 2009 would amend the Truth in Lending Act of 1968. The bill provides that “[n]o residential mortgage loan and no extension of credit under an open end consumer credit plan secured by the principal dwelling of the consumer, other than a reverse mortgage may include terms which require arbitration of any other nonjudicial procedure as the method for resolving any controversy.” H.R. 1728 and Status.
- The Labor Relations First Contract Negotiations Act of 2009 would amend the National Labor Relations Act to require the arbitration of initial contract negotiation disputes. H.R. 243 and Status.
- The Consumer Fairness Act of 2009 would treat arbitration clauses which are unilaterally imposed on consumers as an unfair and deceptive trade practice and prohibit their use in consumer transactions. H.R. 991 and Status.
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arbitration, ADR, law, legislation, Arbitration Fairness Act of 2009, Employee Free Choice Act of 2009, Payday Loan Reform Act of 2009, Fairness in Nursing Home Arbitration Act of 2009, Mortgage Reform and Anti-Predatory Lending Act of 2009, Labor Relations First Contract Negotiations Act of 2009, Consumer Fairness Act of 2009
Tags: federal legislation
In an unpublished opinion, the United States Court of Appeals for the Fifth Circuit held that an International Chamber of Commerce (ICC) arbitral tribunal did not exceed its powers and affirmed the confirmation of the arbitral award. Retired United States Supreme Court Justice Sandra Day O’Connor sat by designation with Circuit Judges Wiener and Stewart.
In Saipem America v. Wellington Underwriting Agencies Limited, No. 08-20247 (5th. Cir. June 9, 2009), Samedan Mediterranean Sea (”Samedan”), later known as Noble Energy Mediterranean, Ltd., contracted with Heerema Marine Contractors Nederland B.V. (”Heerema”) to transport an oil platform from Texas to Israel. The transport of the platform was insured by several underwriters (the “Underwriters”), naming Heerema and Samedan as principal assureds. Heerema subcontracted Saipem America, Inc. (”Saipem”) to serve as Samedan’s Certified Verification Agent and marine warranty surveyor.
The subcontract between Saipem and Heerema provides the following dispute resolution clause:
Any dispute arising out of or in connection with this Subcontract which cannot be amicably settled shall be referred to arbitration in The Hague, The Netherlands, in accordance with the Rules of the International Chamber of Commerce currently in force. Any settlement agreement or arbitral award shall be final and binding upon Parties.
In December 2002, the oil platform suffered extensive damage while in transport. Heerema and Samedan filed insurance claims with the Underwriters for damages. The Underwriters, in turn, made liability claims against Saipem, based on Saipem’s contracts with Samedan. Samedan and the Underwriters submitted their claims to arbitration, pursuant to the arbitration agreement. In particular, they argued that Saipem was guilty of negligent misrepresentation, because Saipem had issued a certificate of approval that the platform could be safely towed from Texas to Israel. The arbitral tribunal found Saipem liable and awarded Underwriters $1,110,657 in actual damages, $399,000 in attorneys’ fees, and $105,000, which corresponds to 50% of the costs of arbitration. The district court confirmed the award and Saipem appeals.
Discussing first the parties’ dispute whether the U.S. Supreme Court’s recent decision in Hall Street Associates, L.L.C. v. Mattel, Inc., 128 S. Ct. 1396 (2008) prevents the court’s review of the arbitration award on nonstatutory grounds (”manifest disregard of the law” or contrary to public policy), the court cited Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) and concluded that the court may vacate an arbitration award only if a statutory ground supports the vacatur.
Moving to the negligence claim, the court considered Saipem’s claim under Federal Arbitration Act (FAA) Section 10(a)(4). Specifically, Saipem argued that “the arbitrators exceeded their powers” because the award is for a claim of negligence, claim that “it is not rationally inferable from the contract.” The court looked into the contract and the parties’ submissions to the tribunal and found that the parties had agreed to submit the claim to arbitration. Because the parties had granted broad authority to the tribunal, the court concluded that the tribunal did not exceed its authority by deciding the claim of negligence.
Finally, turning to the indemnity claim and in response to Saipem’s argument that the tribunal violated FAA Section 10(a)(4), the court concluded that “[T]he arbitral tribunal made detailed findings which are well-supported by governing law, and it did not exceed its powers or so imperfectly execute them that a mutual, final, and definite award was not made. ”
Accordingly, the court affirmed the district court’s judgment confirming the award.
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arbitration, ADR, law, Fifth Circuit, Citigroup Global Markets, Hall Street
Tags: Citigroup Global Markets v. Bacon, FAA Section 10 (a)(4), Fifth Circuit, Hall Street
The Kluwer Arbitration Blog had a recent post discussing the the issue of whether international arbitral awards should be published. As this parallels the arguments we find in U.S. arbitration, we thought you might be interested in reading it. The authors, Alexis Mourre and Alexandre Vagenheim, elaborate on the following questions:
1. Is Arbitral Jurisprudence anything more than a myth?
2. How does persuasiveness of past awards operate?
3. Is Precedent the product of the intrinsic qualities of one or more particularly well-reasoned awards?
4. Why do arbitral awards need to be available?
5. Why is reliance on arbitral precedents not frequent?
6. Should all awards be published?
7. Should awards be published with the names of the arbitrators?
8. How could a mass publication of complete, unabridged awards be achieved?
9. Is confidentiality a valid objection to the publication of arbitration awards?
10. Is there really an overriding principle of confidentiality?
Read the post here: Arbitral Jurisprudence in International Commercial Arbitration: The Case For A Systematic Publication Of Arbitral Awards In 10 Question…, Kluwer Arbitration Blog, May 28, 2009.
Tags: arbitral jurisprudence
