Fredericksburg Care Co. v. Perez

• Decision Date: 26 June 2013
• Docket Number: No. 04–13–00111–CV.,04–13–00111–CV.
• Citation: 406 S.W.3d 313
• Parties: The FREDERICKSBURG CARE COMPANY L.P., d/b/a Princeton Place Rehabilitation and Healthcare Medical Center, Appellant v. Juanita PEREZ, Virginia Garcia, Paul Zapata, and Sylvia Sanchez, Individually and as All Heirs of Elisa Zapata, Deceased, Appellees.
• Court: Texas Court of Appeals

406 S.W.3d 313

The FREDERICKSBURG CARE COMPANY L.P., d/b/a Princeton Place Rehabilitation and Healthcare Medical Center, Appellant

v.Juanita PEREZ, Virginia Garcia, Paul Zapata, and Sylvia Sanchez, Individually and as All Heirs of Elisa Zapata, Deceased, Appellees.

No. 04–13–00111–CV.

Court of Appeals of Texas,

San Antonio.

June 26, 2013.

Shawn C. Golden, Roy R. Barrera, III, David Harris, Golden & Barrera, P.C., San Antonio, TX, for Appellant.

Marynell Maloney, Byron Miller, Gavin H. McInnis, Marynell Maloney Law Firm, PLLC, San Antonio, TX, for Appellees.

Sitting: CATHERINE STONE, Chief Justice, KAREN ANGELINI, Justice, REBECA C. MARTINEZ, Justice.

OPINION

Opinion by: REBECA C. MARTINEZ, Justice.

Appellant The Fredericksburg Care Company, L.P. d/b/a Princeton Place Rehabilitation and Healthcare Medical Center, owner of a nursing and long-term care facility in San Antonio (the “Nursing Facility”), appeals the trial court's denial of its motion to compel arbitration under the Federal Arbitration Act (FAA) in the underlying health care liability lawsuit. The sole issue in this interlocutory appeal is whether Texas Civil Practice and Remedies Code section 74.451, the arbitration provision of the Texas Medical Liability Act, is a law “enacted for the purpose of regulating the business of insurance” within the meaning of the federal McCarran–Ferguson Act (MFA) and is thus protected from FAA preemption. Tex. Civ. Prac. & Rem.Code Ann. § 74.451 (West 2011). We conclude that it is, and therefore affirm the trial court's order denying arbitration under the FAA.

Factual and Procedural Background

Several former residents of Princeton Place Rehabilitation and Healthcare, either individually or through their heirs and representatives of their estates (collectively, the “Former Residents”),¹ sued the Nursing Facility for negligence and gross negligence alleging they were denied appropriate medical and nursing care and suffered abuse and neglect. The Nursing Facility filed a motion to compel arbitration under the FAA based on the written admission agreements signed by, or on behalf of, the Former Residents. Each admission agreement contained an arbitration clause stating, “Any legal dispute, controversy, demand or claim ... that arises out of or relates to the Resident Admission Agreement or any service or health care provided by the Facility to the Resident, shall be resolved exclusively by binding arbitration ... and not by lawsuit or resort to court process....” The clauses did not contain the 10–point boldface type notice required by section 74.451, and did not contain the signature of an attorney for the patient. In addition, some of the Former Residents also signed a “Mutual Agreement to Arbitrate Claims” which similarly did not include the required boldface notice or attorney signature.

The Former Residents filed a response asserting that the FAA did not apply because section 74.451 is a law regulating the business of insurance, and the MFA protects it from preemption by the FAA; therefore, section 74.451 controls the enforceability of the arbitration agreements, which do not comply with the law's requirements. Section 74.451 provides that an arbitration agreement between a health care provider and a patient is not enforceable unless it has a 10–point type boldfaced notice and is signed by the patient's attorney. Tex. Civ. Prac. & Rem.Code Ann. § 74.451. There is no dispute that the arbitration agreements did not comply with section 74.451's requirements.

After a hearing on January 30, 2013, the trial court took the matter under advisement and later issued its ruling denying the Nursing Facility's motion to compel arbitration under the FAA. The Nursing Facility brought this interlocutory appeal. SeeTex. Civ. Prac. & Rem.Code Ann. § 51.016 (West Supp.2012) (authorizing an appeal from an interlocutory order in a matter subject to the FAA). Oral argument was held in this appeal jointly with related Appeal Nos. 04–13–00110–CV, styled Williamsburg Care Co., L.P. d/b/a Princeton Place Rehabilitation and Healthcare Med. Ctr. v. Acosta, et al., 406 S.W.3d 711 (Tex.App.-San Antonio 2013) and 04–13–00112–CV, styled Fredericksburg Care Co., L.P. d/b/a Princeton Place Rehabilitation and Healthcare Med. Ctr. v. Lira, 407 S.W.3d 810 (Tex.App.-San Antonio 2013). Separate opinions and judgments are being issued in each of the three related appeals, but the legal analysis is identical.

Discussion

Standard of Review

Whether a valid arbitration agreement exists is a legal question subject to de novo review. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003). The party seeking to compel arbitration has the initial burden to establish the existence of a valid arbitration agreement and that the claims fall within the agreement's scope. In re AdvancePCS Health L.P., 172 S.W.3d 603, 605, 607 (Tex.2005) (orig. proceeding). The strong presumption favoring arbitration arises only after the party seeking to compel arbitration proves that a valid arbitration agreement exists. Webster, 128 S.W.3d at 227. Under the FAA, an agreement to arbitrate is valid if it meets the requirements of general contract law of the applicable state. In re AdvancePCS, 172 S.W.3d at 606 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Once it is established that a valid arbitration agreement exists covering the claims, a presumption attaches favoring arbitration and the burden shifts to the party resisting arbitration to establish a defense to enforcing arbitration. In re AdvancePCS, 172 S.W.3d at 607;J.B. Hunt Transport, Inc. v. Hartman, 307 S.W.3d 804, 810 (Tex.App.-San Antonio 2010, orig. proceeding).

Federal Arbitration Act (FAA)—Preemption of Conflicting State Law

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1, et seq., “establishes a national policy favoring arbitration when the parties contract for that mode of dispute resolution.” Preston v. Ferrer, 552 U.S. 346, 349, 128 S.Ct. 978, 169 L.Ed.2d 917 (2008) (citing Southland Corp. v. Keating, 465 U.S. 1, 10–12, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984)). The FAA rests on Congress's authority under the Commerce Clause and applies in state courts as well as federal courts. Id. at 349, 353, 128 S.Ct. 978. Section 2 of the FAA states, “A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2; see In re Halliburton Co., 80 S.W.3d 566, 568 (Tex.2002) (orig. proceeding) (under FAA, an arbitration agreement that is valid under state contract law and involves interstate commerce is “valid, irrevocable, and enforceable”). The national policy in favor of arbitration codified in the FAA “foreclose[s] state legislative attempts to undercut the enforceability of arbitration agreements.” Preston, 552 U.S. at 353, 128 S.Ct. 978;Southland, 465 U.S. at 16, 104 S.Ct. 852. Thus, the FAA preempts state law restrictions on arbitration that are inconsistent with the FAA. Preston, 552 U.S. at 353, 128 S.Ct. 978 (noting that the “FAA's displacement of conflicting state law is ‘now well-established’ ” and “has been repeatedly reaffirmed”); see, e.g., Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 684–85, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996) (holding that FAA preempted Montana statute [non-insurance related] which conditioned enforceability of contractual arbitration clause on compliance with special requirement that notice stating the “contract is subject to arbitration” be printed on first page of contract in underlined capital letters).

The Texas Supreme Court has held that an attorney-signature restriction on arbitration contained in the general Texas Arbitration Act (TAA) is inconsistent with the FAA. In In re Nexion Health at Humble, Inc., 173 S.W.3d 67 (Tex.2005) (orig. proceeding), the Supreme Court considered whether an attorney-signature requirement imposed by the TAA conflicted with the FAA, and was thus preempted by the FAA. The Court focused on the following four factors: (1) whether the arbitration agreement was in writing; (2) whether it involved interstate commerce; (3) whether it could withstand scrutiny under traditional contract defenses; and (4) whether state law affected the enforceability of the agreement. Id. at 69. With respect to the second factor, the Court held that transmission of Medicare funds across state lines constitutes interstate commerce which brings a health care provider-patient contract within the FAA's scope. Id. Having found the first three factors, the Court held that the fourth factor was also met because the TAA provision “interferes with the enforceability of the arbitration agreement by adding an additional requirement—the signature of a party's counsel—to arbitration agreements in personal injury cases;” therefore, the TAA was preempted by the FAA and the attorney-signature requirement did not apply. Id. For FAA preemption to apply, the state law must refuse to enforce an arbitration agreement that the FAA would enforce. In re D. Wilson Constr. Co., 196 S.W.3d 774, 780 (Tex.2006) (orig. proceeding) (“For the FAA to preempt the TAA, state law must refuse to enforce an arbitration agreement that the FAA would enforce, either because (1) the TAA has expressly exempted the agreement from coverage, ... or (2) the TAA has imposed an enforceability requirement not found in the FAA ....”); see also In re AdvancePCS, 172 S.W.3d at 606 n. 5 (FAA preempts state contractual requirements that apply only to arbitration clauses, citing Casarotto, 517 U.S. at 686–87, 116 S.Ct. 1652).In re Nexion did not address the potential impact of the MFA on the preemption analysis.

McCarran–Ferguson Act (MFA)—Exception for State Law Regulating Insurance

The...