In re Sthran

• Decision Date: 29 October 2010
• Docket Number: No. 05–10–01176–CV.,05–10–01176–CV.
• Citation: 327 S.W.3d 839
• Parties: In re STHRAN, Relator.
• Court: Texas Court of Appeals

327 S.W.3d 839

In re STHRAN, Relator.

No. 05–10–01176–CV.

Court of Appeals of Texas, Dallas.

Oct. 29, 2010.

Steven E. Couch, Kelly, Sutter & Kendrick, PC, Houston, TX, Eric H. Marye, The Marye Firm, Dallas, TX, for Relator.Lori D. Proctor, Savrina R. Karels, Johnson, Trent, West & Taylor, L.L.P., Houston, for Real Party in Interest.Before Justices MOSELEY, LANG, and MYERS.

OPINION

Opinion By Justice LANG.

In this original proceeding, relator Etta Sthran seeks a writ of mandamus ordering the trial court to vacate the portion of its March 29, 2010 “Order Granting in Part Motion to Compel Arbitration and Motion to Dismiss or Stay” that orders arbitration of relator's individual claims against real party in interest “Forest Lane Healthcare Center and THI of Texas at Forest Lane, LLC” (“Forest Lane”).¹ For the reasons below, we conclude (1) the trial court abused its discretion by ordering relator's individual claims to arbitration because the arbitration clause at issue is not in compliance with state law, which is applicable here, and (2) relator has no adequate remedy by appeal. We conditionally grant the writ of mandamus.

I. FACTUAL AND PROCEDURAL BACKGROUND

On February 13, 2004, relator's husband, Sam Sthran Jr. (“Mr. Sthran”), was admitted to Forest Lane for nursing care. At that time, relator signed Forest Lane's “Admission Contract” (the “contract”) on a signature line labeled “Fiduciary Party (if any)” (emphasis original). The contract was not signed by Mr. Sthran. The contract contained, inter alia, the following provision:

Pursuant to the Federal Arbitration Act, any action, dispute, claim, or controversy of any kind ( e.g., whether in contract or in tort, statutory or common law, legal or equitable, or otherwise) now existing or hereafter arising between the parties in any way arising out of, pertaining to or in connection with the provision of healthcare services, any agreement between the parties, the provision of any other goods or services by [Forest Lane] or other transactions, contracts or agreements of any kind whatsoever, any past, present or future incidents, omissions, acts, errors, practices, or occurrence causing injury to either party whereby the other party or its agents, employees or representatives may be liable, in whole or in part, or any other aspect of the past, present, or future relationships between the parties shall be resolved by binding arbitration administered by the National Health Lawyers Association (the “NHLA”).

Following Mr. Sthran's death in 2008, relator, individually and as surviving spouse and representative of Mr. Sthran, filed suit against Forest Lane on December 3, 2009.² In her petition, relator alleged in relevant part that “negligent acts and omissions” of Forest Lane caused damages to Mr. Sthran during his lifetime and also were a proximate cause of his death. Relator claimed damages pursuant to the “Texas Wrongful Death Statute” and the “Texas Survival Statute.”

Forest Lane responded with an answer and general denial on December 30, 2009. In its answer, Forest Lane asserted as an affirmative defense that “the disputes at issue in this lawsuit are governed by a valid and enforceable arbitration agreement.” On January 25, 2010, Forest Lane filed a motion to compel arbitration and dismiss, or, in the alternative, stay proceedings. In that motion, Forest Lane asserted, in part, “Since Plaintiffs' claims are covered by the Arbitration Agreement executed by Etta Sthran, Defendant requests that the Court enforce the agreement and compel arbitration in accordance with the Federal Arbitration Act (“FAA”) and dismiss, or, in the alternative, stay this lawsuit pending the arbitration.”

Relator filed a response to Forest Lane's motion on March 15, 2010. In that response, relator contended Forest Lane's motion should be denied for two independent reasons: (1) because Forest Lane has “failed to prove-up” relator's legal authority to make healthcare and legal decisions for Mr. Sthran “such that she could waive a jury trial and agree to arbitrate all disputes on his behalf,” the arbitration provision in the contract is unenforceable and (2) the arbitration provision fails to satisfy the notice requirements of Texas Civil Practice and Remedies Code section 74.451, which addresses agreements to arbitrate health care liability claims. ³ See Tex. Civ. Prac. & Rem.Code Ann. § 74.451 (West 2005). Further, relator asserted that if Forest Lane contends section 74.451 is preempted by the FAA, the McCarren–Ferguson Act (“MFA”) “reverse preempts the FAA.” Relator argued

Specifically, the MFA prohibits the federal preemption of any state law which was/is enacted for the purpose of regulating insurance and Texas courts have held that Chapter 74 and Section 74.451 (and its predecessor Article 4590i) were enacted for the purpose of regulating insurance and as such, cannot be preempted by federal law. Therefore, Section 74.451 cannot be preempted by the FAA and because the arbitration provision does not meet the Section 74.451 notice requirements, the provision cannot be enforced.(emphasis original).

On March 18, 2010, Forest Lane filed a reply in which it asserted, inter alia, that “[t]he Texas Supreme Court has held that the lack of compliance with a Texas statute, i.e. the failure to comply with Chapter 74 of the Texas Civil Practice and Remedies Code, does not invalidate an arbitration agreement governed by the FAA because preemption exists.” Additionally, Forest Lane contended the arbitration agreement is valid and enforceable because relator either (1) signed the arbitration agreement on behalf of her husband, or (2) signed the arbitration agreement in her individual capacity.

Following a hearing, the trial court signed an “Order Granting in Part Motion to Compel Arbitration and Motion to Dismiss or Stay” dated March 29, 2010. The trial court stated in relevant part in that order

Claims being brought by Plaintiff Etta Sthran for her individual damages and not derivative of the claims of Sam Sthran or of his estate of [sic] are, accordingly, ORDERED to arbitration (pursuant to the terms of the Admission Contract/Arbitration Agreement executed on February 13, 2004, between Forest Lane and Etta Sthran); AND prosecution of said claims in this case are STAYED pending the conclusion of arbitration.

Any additional relief requested in the Motion not herein granted is hereby Denied.

(emphasis original). This mandamus proceeding followed.

II. RELATOR'S ENTITLEMENT TO MANDAMUS RELIEF

A. Applicable Law

Mandamus will issue if the relator establishes a clear abuse of discretion for which there is no adequate remedy by appeal. In re Odyssey Healthcare, Inc., 310 S.W.3d 419, 422 (Tex.2010) (orig.proceeding); In re Deere & Co., 299 S.W.3d 819, 820 (Tex.2009) (orig.proceeding); In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex.2004) (orig.proceeding). A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law or if it clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex.2005) (orig.proceeding); In re Tex. Am. Express, Inc., 190 S.W.3d 720, 723 (Tex.App.-Dallas 2005, orig. proceeding). A trial court has no discretion in determining what the law is or applying the law to the facts. Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992) (orig.proceeding). Thus a clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion, and may result in appellate reversal by extraordinary writ. Id.; see also In re Tex. Am. Express, 190 S.W.3d at 724.

“There is no definitive list of when an appeal will be ‘adequate,’ as it depends on a careful balance of the case-specific benefits and detriments of delaying or interrupting a particular proceeding.” In re Gulf Exploration, LLC, 289 S.W.3d 836, 842 (Tex.2009) (orig.proceeding); see also In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 468 (Tex.2008) (orig.proceeding) (“[T]he adequacy of an appeal depends on the facts involved in each case.”). With respect to mandamus review of orders compelling arbitration, the supreme court has stated that “the balance will generally tilt toward reviewing orders compelling arbitration only on final appeal.” In re Gulf Exploration, LLC, 289 S.W.3d at 843. However, the court has further stated

In those rare cases when legislative mandates conflict, mandamus “may be essential to preserve important substantive and procedural rights from impairment or loss, [and] allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments.”

Id. (quoting In re Prudential Ins. Co., 148 S.W.3d at 136).

B. Analysis

1. Enforceability of Arbitration Provision

In the first of her three issues, relator contends the arbitration provision in the contract is unenforceable because it fails to satisfy the mandatory notice requirement of Texas Civil Practice and Remedies Code section 74.451. See Tex. Civ. Prac. & Rem.Code Ann. § 74.451. Relator asserts the notice requirement of section 74.451 applies because the MFA “reverse preempts” the FAA. Consequently, relator argues, the trial court abused its discretion by ordering relator's individual claims to arbitration.

Forest Lane argues the FAA applies in this case for two reasons: (1) the parties' relationship involves interstate commerce and (2) the “arbitration agreement” signed by relator invokes the FAA. According to Forest Lane, the FAA preempts the notice requirements of Chapter 74, thereby creating a valid and enforceable arbitration agreement between relator and Forest Lane. Forest Lane contends “the MFA does not reverse preempt the FAA because Chapter 74 of the Texas Civil Practice & Remedies Code was not enacted for the purpose of regulating insurance and it does not invalidate the intent of Chapter 74.”

A party...