McIntosh v. Tenet Health Systems Hospitals

• Decision Date: 12 June 2001
• Citation: 48 S.W.3d 85
• Parties: (Mo.App. S.D. 2001) Phillip McIntosh, Plaintiff/Respondent v. Tenet Health Systems Hospitals, Inc./Lutheran Medical Center, et al., Defendants/Appellants. ED78062 0
• Court: Missouri Court of Appeals

48 S.W.3d 085 (Mo.App. S.D. 2001)

Phillip McIntosh, Plaintiff/Respondent v. Tenet Health Systems Hospitals, Inc./Lutheran Medical Center, et al., Defendants/Appellants.

ED78062

Missouri Court of Appeals Eastern District

06/12/2001

Appeal From: Circuit Court of the City of St. Louis, Hon. Michael B. Calvin

Counsel for Appellant: Jonathan S. Harbuck and Susan Herold

Counsel for Respondent: James M. Martin

Opinion Summary: Opinion modified by Court's own motion on June 26,2001. This substitution does not constitute a new opinion.

Appellant Tenet Health Systems Hospitals, Inc. ("Tenet") appeals the order denying its motion to stay respondent Phillip McIntosh's lawsuit pending arbitration. Tenet argues the trial court erred in concluding it waived its right to arbitrate.

Division Three holds: Absent conduct inconsistent with intent to arbitrate, mere delay in seeking arbitration did not support the trial court's finding a waiver.

Gaertner, Sr., P.J., and Draper III, J., concur.

Lawrence G. Crahan, Judge

Appellant Tenet Health Systems Hospitals, Inc. ("Tenet") appeals the order denying its motion to stay respondent Phillip McIntosh's lawsuit pending arbitration. Tenet argues the trial court erred in concluding it waived its right to arbitrate. We reverse and remand.

Phillip McIntosh worked as a drug counselor for the C-Star program, a substance abuse treatment program operated by Lutheran Medical Center and owned by Tenet Health Systems Hospitals, Inc. At the beginning of his employment, McIntosh was issued an employee handbook containing a copy of Tenet's "Open Door Policy and Fair Treatment Process." Tenet, through its Open Door Policy, "encourage[d] its employees to openly express their problems, concerns and opinions on any issue related to their employment." Tenet established the Fair Treatment Process ("FTP") as a "comprehensive mechanism for resolving employment-related disputes" in instances where the Open Door Policy failed to do so. Tenet described the FTP as a "multi-step process that ultimately provides for final and binding arbitration of employment-related disputes."¹ As a condition of employment, McIntosh acknowledged receipt of the employee handbook by signing an "Employee Acknowledgement Form" stating, in part, that:

[I] acknowledge that I have received a copy of the Tenet Fair Treatment Process brochure. I hereby voluntarily agree to use the Company's Fair Treatment Process and to submit to final and binding arbitration any and all claims and disputes that are related in any way to my employment or the termination of my employment with Tenet. I understand that final and binding arbitration will be the sole and exclusive remedy for any such claim or dispute against Tenet . . . and that, by agreeing to use arbitration to resolve my dispute, both the Company and I agree to forego any right we each may have had to a jury trial on issues covered by the Fair Treatment Process I also agree that such arbitration will be conducted before an experienced arbitrator chosen by me and the Company, and will be conducted under the Federal Arbitration Act and the procedural rules of the American Arbitration Association ("AAA").

In November 1996, Tenet informed McIntosh that patients under his care had complained of "unprofessional conduct." Tenet suspended his employment. Later that month, McIntosh received a letter advising him of his termination.

The parties dispute the events following McIntosh's discharge. Correspondence between the parties reveals McIntosh, in December 1996, requested a "name clearing hearing" to resolve the claims of unprofessional conduct. Tenet denied the request stating McIntosh was required to follow the grievance procedures set forth under the FTP. In January 1997, Tenet forwarded McIntosh further information on the FTP and advised him to proceed through the initial steps of the process. McIntosh denies receiving this information. McIntosh further contends he attempted to file a complaint with Tenet pursuant to the FTP but was "rejected [and] not provided with any appropriate forms."

Tenet denies any wrongdoing. Tenet states it attempted to mail McIntosh a package of materials relating to the FTP one week after his discharge, but he had moved and provided no forwarding address. Tenet further disputes any claim that it frustrated McIntosh's attempts to file a grievance under the FTP.

In March 1998, sixteen months following his termination, McIntosh sued Tenet for wrongful termination and breach of contract. McIntosh further requested the trial court to compel arbitration, or in the alternative, to promptly hear all issues on the matter. Tenet, in May 1998, agreed to arbitrate McIntosh's claim. In July 1999, McIntosh filed a demand for arbitration with the American Arbitration Association. The hearing was set for March 2000.

At the same time, McIntosh's lawsuit proceeded toward trial. Tenet moved to stay the proceedings pending arbitration. McIntosh, however, withdrew from arbitration "because of the long delay in establishing the arbitration process." In his response to Tenet's motion, McIntosh argued Tenet's actions following his discharge constituted a waiver of its right to arbitrate. McIntosh cited Tenet's failure to provide a "meaningful grievance process . . . resulting in the filing of [his] lawsuit."

The trial court denied Tenet's motion to stay pending arbitration, concluding Tenet "waived its right to arbitration and that a stay of the present action, given the history and obstacles to Tenet's grievance process, would only frustrate the goals of efficient, expedient dispute resolution." Tenet's appeal followed.²

Our review is controlled by the Federal Arbitration Act ("FAA"), 9 U.S.C. section 1 et seq. 2000, which is applicable to both state and federal courts. Boogher v. Stifel, Nicolaus & Co., 825 S.W.2d 27, 29 (Mo. App. 1992) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). The FAA establishes a "federal policy favoring arbitration." Berhorst v. J.L. Mason of Mo., Inc., 764 S.W.2d 659, 662 (Mo. App. 1988).

The FAA applies to contracts evidencing transactions "involving commerce." 9 U.S.C. section 2; Mueller v. Hopkins & Howard, P.C., 5 S.W.3d 182, 185 (Mo. App. 1999). The United States Supreme Court has held that the term "involving commerce" is the functional equivalent of "affecting commerce." Reis v. Peabody Coal Co., 935 S.W.2d 625, 629 (Mo. App. 1996) (quoting Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 265-66 (1995)). Federal courts have interpreted the phrase broadly, applying the FAA in cases where the contract simply relates to interstate commerce even when the relationship was less than substantial. Mueller, 5 S.W.3d at 185.

The record establishes Tenet, through its C-Star program, treats out-of-state patients, receives goods and services from out-of-state vendors, and receives reimbursement from out-of-state and multi-state insurers. McIntosh's employment as a drug counselor facilitated and affected Tenet's business activities. This tangential affect on interstate commerce subjects the arbitration agreement to the FAA. See Patterson v. Tenet Healthcare, Inc., 113 F.3d 832, 835-37 (8th Cir. 1997); Crawford v. West Jersey Health Sys., 847 F. Supp. 1232, 1240 (D.N.J. 1994).³

On appeal, Tenet asserts the trial court erred in determining it waived its right to arbitrate under the FAA. We agree.

Under both the FAA and Missouri law, a written agreement to submit a present or future dispute to arbitration is valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C. section 2; McCarney v. Nearing, Staats, Prelogar & Jones, 866 S.W.2d 881, 887 (Mo. App. 1993). Under the FAA, ordinary contract principles govern whether parties have agreed to arbitrate. Patterson, 113 F.3d at 834.

As discussed above, Tenet's FTP was set forth in its employee handbook. Under Missouri law, employee handbooks generally are not considered contracts because they normally lack the traditional prerequisites of a contract. Id. at 835. McIntosh's signed employee acknowledgement form, however, contained an arbitration clause in which McIntosh "voluntarily agree[d] to use [Tenet's] Fair Treatment Process and to submit to final and binding arbitration any and all claims and disputes that are related in any way to . . . the termination of my employment with Tenet." In exchange for McIntosh's agreement to arbitrate, Tenet agreed "to submit all claims and disputes it may have with [McIntosh] to . . . arbitration." We conclude this arbitration clause contemplates a mutual agreement between the parties to submit to the terms of the FTP and thus constitutes an enforceable contract. See id. at 834-35 (similar arbitration clause within employee handbook held to constitute separate and enforceable contract under Missouri law).

Generally, a court must stay litigation if it determines that the parties agreed to arbitrate. Fru-Con Constr. Co. v. Southwestern Redevelopment Corp. II, 908 S.W.2d 741, 744 (Mo. App. 1995). But the right to arbitrate under the FAA may be waived. Mueller, 5 S.W.3d at 187. The question of what constitutes a waiver of the right to arbitrate depends on the facts of each case. Berhorst, 764 S.W.2d at 662. A party waives its right to arbitrate if it (1) had knowledge of the existing right to arbitrate, (2) acted inconsistently with that right, and (3) prejudiced the party opposing arbitration. Id. There is, however, a strong presumption against any such waiver. Id. Any doubts as to whether a party has waived its right to arbitrate...