Hays v. HCA Holdings, Inc.

• Decision Date: 29 September 2016
• Docket Number: No. 15-51002,15-51002
• Parties: John T. Hays, M.D., Plaintiff–Appellant v. HCA Holdings, Incorporated; HCA Physician Services, Incorporated, Defendants–Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

838 F.3d 605

John T. Hays, M.D., Plaintiff–Appellant

v.HCA Holdings, Incorporated; HCA Physician Services, Incorporated, Defendants–Appellees

No. 15-51002

United States Court of Appeals, Fifth Circuit.

FILED September 29, 2016

Kevin James Terrazas, Esq., Timothy A. Cleveland, Cleveland Terrazas, P.L.L.C., Kevin James Terrazas, Esq., Sara Janes, Nicole Susanne LeFave, Weisbart Springer Hayes, L.L.P., Austin, TX, for Plaintiff–Appellant.

Elizabeth D. Alvarado, Esq., Carlos Alberto Mattioli, George A. Shannon, Jr., Shannon, Martin, Finkelstein, Alvarado & Dunne, P.C., Michael P. Jones, Nancy Lynne Patterson, Morgan, Lewis & Bockius, L.L.P., Houston, TX, for Defendants–Appellees.

Before STEWART, Chief Judge, and CLEMENT and HAYNES, Circuit Judges.

EDITH BROWN CLEMENT

, Circuit Judge:

Plaintiff–Appellant Dr. John T. Hays suffers from epilepsy. After a series of stress-related seizures, he was fired from his cardiology practice. He brought several claims against Defendant–Appellees HCA Holdings, Inc. and HCA Physician Services, Inc. (collectively “HCA”) arising out of his alleged wrongful termination. The district court ordered arbitration of his claims based on equitable estoppel. We AFFIRM.

I.

Hays worked as a cardiologist and contends that HCA failed to accommodate his requests for a limited workload, which caused him to suffer an increased number of stress-related seizures and eventually led to his firing. Initially, Hays sued HCA Holdings, Capital Area Cardiology (“CAC”), and Austin Heart, PLLC, in Texas state court for negligence and for violation of the Texas Commission on Human Rights Act (“TCHRA”). He also sought a declaratory judgment that his Physician Employment Agreement (the “Agreement”) was not a valid and enforceable contract. But the Agreement, to which Austin Heart, CAC, and Hays were signatories, required that any disputes relating to the Agreement be submitted to mandatory, binding arbitration. Because of the arbitration clause, the state court granted Austin Heart and CAC's motion to dismiss and compel arbitration. Continuing to litigate against HCA Holdings, Hays amended his state court petition to add HCA Physician Services as a defendant. HCA removed the case to federal court. Hays then amended his complaint to assert claims for wrongful termination in violation of TCHRA, negligence, breach of contract, and tortious interference with at-will employment.

HCA moved to dismiss and compel arbitration on all claims based on equitable estoppel. The district court granted the motion. Applying Texas law, the district court explained that a non-signatory to an agreement could enforce an arbitration clause pursuant to equitable estoppel, and that Texas has explicitly recognized direct benefits estoppel and has implicitly authorized intertwined claims estoppel. Because HCA's liability under the tortious interference claim could not “be determined without reference to the Physician Employment Agreement,” the district court applied direct benefits estoppel and concluded that Hays must arbitrate that claim. As to Hays's claims for wrongful termination, breach of contract, and negligence, the district court determined that intertwined claims estoppel applied. Relying on JLM Industries, Inc. v. Stolt–Nielsen, SA , 387 F.3d 163 (2d Cir. 2004)

, which the Texas Supreme Court discussed in In re Merrill Lynch Trust Co. FSB , 235 S.W.3d 185, 193–94 (Tex. 2007), the district court found that Hays had treated Austin Heart, CAC, and HAC “as a single unit in its pleadings” and had raised “virtually indistinguishable factual allegations” against all defendants. The district court concluded that Hays's pleadings satisfied the “close relationship” test for intertwined claims estoppel. Because all of Hays's claims were subject to arbitration on equitable estoppel grounds, the district court ordered arbitration and dismissed the case with prejudice. Hays timely appealed.

II.

We review “an order compelling arbitration de novo.” Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp. , 748 F.3d 249, 256 (5th Cir. 2014)

. We review for an abuse of discretion the district court's use of equitable estoppel to compel arbitration. Id. “A district court abuses its discretion if it premises its decision on an erroneous application of the law or a clearly erroneous assessment of the evidence.” Gross v. GGNSC Southaven, LLC , 817 F.3d 169, 175 (5th Cir. 2016). We “may affirm the district court's judgment on any basis supported by the record.” In re Complaint of Settoon Towing, LLC , 720 F.3d 268, 280 (5th Cir. 2013).

III.

Hays contends that the district court abused its discretion in compelling arbitration on his claims under equitable estoppel.¹

A. Direct Benefits Estoppel

Hays maintains that the district court erred in applying direct benefits estoppel to his tortious interference claim.

Direct benefits estoppel applies when the claim depends on the contract's existence and would be “unable to ‘stand independently’ without the contract.” G.T. Leach Builders , 458 S.W.3d at 528

(quoting In re Kellogg Brown & Root, Inc. , 166 S.W.3d 732, 739–40 (Tex. 2005) ). “Whether a claim seeks a direct benefit from a contract containing an arbitration clause turns on the substance of the claim, not artful pleading.” Id . at 527. “ ‘[W]hen the substance of the claim arises from general obligations imposed by state law, including statutes, torts and other common law duties, or federal law,’ rather than from contract, ‘direct benefits' estoppel does not apply, even if the claim refers to or relates to the contract.” Id. at 528 (quoting In re Morgan Stanley & Co. , 293 S.W.3d 182, 184 n.2 (Tex. 2009) ).

Here, Hays pled his tortious interference with at-will employment claim in the alternative, stating that the claim applies only if HCA is not found to be his employer. In so pleading, Hays essentially alleges that HCA tortiously interfered with his at-will employment relationship with Austin Heart and CAC. The viability of this claim, however, depends on reference to the Agreement. Cf. In re Vesta Ins. Grp., Inc. , 192 S.W.3d 759, 762 (Tex. 2006)

(“[T]ortious interference claims between a signatory to an arbitration agreement and agents or affiliates of the other signatory arise more from the contract than general law, and thus fall on the arbitration side of the scale.”). As the district court correctly recognized, an at-will employment relationship may exist even if the parties have entered into an employment contract, such as the Agreement. C.S.C.S., Inc. v. Carter , 129 S.W.3d 584, 591 (Tex. App.–Dallas 2003, no pet.) (“A contract of employment for a term may still be at-will if the agreement allows termination for any reason.”). Because the Agreement would define the employment relationship, even at-will employment, between Hays and Austin Heart and CAC, any alleged liability for tortious interference by HCA “must be determined by reference” to the Agreement. G.T. Leach Builders , 458 S.W.3d at 528 (quoting In re Weekley Homes, LP , 180 S.W.3d 127, 132 (Tex. 2005) ).² Thus, HCA's liability depends on the Agreement and the district court did not abuse its discretion in applying direct benefits estoppel to Hays's tortious interference claim.

B. Intertwined Claims Estoppel

Hays argues that the district court erred by applying intertwined claims estoppel to his remaining claims. He contends that Texas does not recognize that theory of estoppel, and even if it did, the theory is inapplicable here.

Intertwined claims estoppel involves “compel[ing] arbitration when a nonsignatory defendant has a ‘close relationship’ with one of the signatories and the claims are ‘intimately founded in and intertwined with the underlying contract obligations.’ ” In re Merrill Lynch , 235 S.W.3d at 193–94

(quoting Thomson–CSF, S.A. v. Am. Arbitration Ass'n , 64 F.3d 773, 779 (2d Cir. 1995) ); see

Denney v. BDO Seidman, LLP , 412 F.3d 58, 70–71 (2d Cir. 2005). It applies when there is a “tight relatedness of the parties, contracts, and controversies.” JLM Indus. , 387 F.3d at 177.³ Courts have employed this exception to dismiss “strategic pleading” that seeks to avoid arbitration. In re Merrill Lynch , 235 S.W.3d at 194.

As Hays correctly notes, the Texas Supreme Court has not expressly adopted intertwined claims estoppel as a valid theory of estoppel. The Texas Supreme Court acknowledged in Merrill Lynch

that “other federal circuits have estopped signatory plaintiffs from avoiding arbitration with nonsignatories using an ‘intertwined-claims' test.” 235 S.W.3d at 193. But the court referenced it for the purpose of comparing that theory with concerted misconduct estoppel, which the court went on to reject. Id. at 193–95. Distinguishing the two, the Texas Supreme Court explained that concerted misconduct estoppel lacks the limiting “close relationship” component of intertwined claims estoppel. Id. at 194 ; see

In re Banc One Inv. Advisors Corp. , No. 01–07–01021–CV, 2008 WL 340507, at *2 (Tex. App.–Houston Feb. 7, 2008, no pet.) (indicating that the “close relationship” test is “distinct from concerted misconduct”).

Texas courts of appeals, after Merrill Lynch

, have split on whether the Texas Supreme Court has recognized intertwined claims estoppel. Compare

Cotton Commercial USA, Inc. v. Clear Creek Indep. Sch. Dist. , 387 S.W.3d 99, 105–06 (Tex. App.–Houston [14th Dist.] 2012, no pet.) (stating that the Texas Supreme Court in Merrill Lynch recognized intertwined claims estoppel), and

FD Frontier Drilling (Cyprus), Ltd. v. Didmon, 438 S.W.3d 688, 695 (Tex. App.–Houston [1st Dist.] 2014), reh'g overruled (July 29, 2014), review denied (Nov. 7, 2014) (“If the facts alleged ‘touch matters,’ have a ‘significant relationship’ to, are ‘inextricably enmeshed’ with, or are ‘factually intertwined’ with the contract containing the arbitration agreement, the claim is arbitrable.” (quoting Cotton Commercial USA , 387 S.W.3d at 108 )), and

Zars v. Brownlow, No. 07–07–00303–CV, 2013 WL 3355660, at *4 ...