Las Palmas Med. Ctr. v. Moore

• Decision Date: 06 October 2010
• Docket Number: No. 08–09–00226–CV.,08–09–00226–CV.
• Citation: 349 S.W.3d 57
• Parties: LAS PALMAS MEDICAL CENTER, Appellant,v.Robert MOORE, M.D. and Debora Moore, M.C., Appellees.
• Court: Texas Court of Appeals

349 S.W.3d 57

LAS PALMAS MEDICAL CENTER, Appellant,

v.Robert MOORE, M.D. and Debora Moore, M.C., Appellees.

No. 08–09–00226–CV.

Court of Appeals of Texas, El Paso.

Oct. 6, 2010.

Monte F. James, Austin, TX, for Appellant.John P. Mobbs, Attorney at Law, El Paso, TX, for Appellees.

Before CHEW, C.J., McCLURE, J., and BRAMBLETT, Judge.

OPINION

ANN CRAWFORD McCLURE, Justice.

Las Palmas Medical Center appeals an order denying its motion to confirm an arbitration award, vacating the arbitration award, and ordering a new arbitration proceeding. For the reasons that follow, we reverse and render judgment confirming the arbitration award.

FACTUAL SUMMARY

Las Palmas Medical Center is a hospital operating in El Paso. Faced with a shortage of urologists in El Paso in 2004, Las Palmas recruited Robert Moore, M.D. and Debora Moore, M.D., to relocate from Houston to El Paso. The terms of the recruiting agreement required that both doctors obtain and maintain full medical privileges at Las Palmas, maintain medical staff membership in good standing, and engage in the private practice of medicine as urologists in the community for forty-eight months. The recruiting agreements guaranteed each doctor income for two years and provided that Las Palmas would advance the difference between the guaranteed monthly income and the gross receipts of their practice. Las Palmas agreed to forgive 1/24 of the advances for every month the doctors remained in full-time practice in El Paso after the end of the guarantee period. At the end of the guarantee period, each doctor was obligated to pay to Las Palmas the sum of the advances less the amounts forgiven under the terms of the agreement. The recruiting agreements permitted Las Palmas to audit the doctors' books and records to assure compliance. The parties agreed to arbitrate any disputes arising out of or related to the recruiting agreements.

In December 2006, Las Palmas requested accounts receivable and monthly aging reports by January 15, 2007. The Moores did not provide the information and on February 21, Las Palmas informed them that an audit would be conducted by an independent firm. The parties disagree about the degree of the Moores' cooperation after this point. Las Palmas contends that an audit scheduled for March 12 had to be postponed and rescheduled because documents requested by the CPA firm were not provided. On June 18, Las Palmas' attorney Monte James of Jackson Walker L.L.P. sent a letter demanding that the Moores comply with the recruiting agreement provision requiring them to give Las Palmas access to the financial books and records. The letter advised that if they failed to comply, Las Palmas would institute legal action. The Moores advise us that they did not refuse to submit to an audit and complain that Las Palmas did not show up on at least two occasions when it was scheduled to appear at the Moores' office for an audit. The Moores also claim that they relied on their office manager, their CPA, and tax attorney Michael Graham to compile the financial information and submit it to Las Palmas.

In October 2007, Las Palmas initiated an arbitration proceeding alleging the Moores had failed to provide requested documents and submit to an audit. The arbitration administrator, the American Health Lawyers Association (AHLA), provided attorneys James and Graham with a list of ten potential arbitrators and their respective curricula vitae. The letter asked the parties to rank the individuals, with number one being the most preferred arbitrator, and gave them the opportunity to strike one individual. The individual with the lowest sum would be named as the arbitrator. The parties submitted their rankings to the AHLA and Penny Hobbs was appointed. On November 12, 2007, Hobbs emailed the following letter to James, Graham, Marian Wu,¹ and Phil T. Dearth: ²

I have been appointed arbitrator in the above-referenced matter. I do not believe my participation as the arbitrator would be directly adverse to any interest described in Rule 3.02 of the AHLA Code of Ethics for Arbitrator. Nor do I believe that any disclosure is required under Rule 3.02. However, in the spirit of full disclosure, I advise you that I have represented clients in matters in which Jackson Walker L.L.P. represented clients both adverse to and aligned with my clients. As a result, I am familiar with both Mr. James and Ms. Wu. I do not believe that my familiarity with these lawyers would affect my ability to perform as an arbitrator in this matter. However, in light of this disclosure, if either party objects to my serving as an arbitrator, I would appreciate your notifying me by November 15, 2007, so that I may timely advise AHLA whether I will accept the appointment.When Hobbs learned that Dearth was no longer associated with Wood, Dearth & Day, she sent the letter to T. Barrett Wood, who had taken over the case when Dearth left the firm. No objections were made to Hobbs serving as arbitrator and she accepted the appointment.

On November 29, 2007, Hobbs ordered the Moores to provide Las Palmas with certain documents by December 14, 2007, and ordered that the audit be completed by January 18, 2008 absent agreement of the parties. When the Moores did not produce the documents as ordered, the audit was rescheduled for January 21, 2008 and it was completed on or around that date. Following receipt of the audit report, Las Palmas amended its arbitration petition to seek recovery of the advances paid to Dr. Debora Moore on the ground she had not worked full-time. It was around this time that Antonio Silva became lead counsel for the Moores.

On July 31, 2008, eleven days before the final arbitration hearing, Silva sent an email to Hobbs objecting to her appointment because she had listed James as a reference on her curriculum vitae. Silva found the resume in one of Dearth's files as he was preparing for the arbitration. James pointed out in a responsive email that the Moores and their two prior attorneys had received Hobbs' CV before she was selected. Hobbs responded by email:

Mr. Silva, Mr. James has already provided you with a copy of the letter I sent on November 12, 2007 to the attorneys representing the Respondents at the time, advising them of my familiarity with Mr. James, Ms. Wu and the law firm of Jackson Walker L.L.P. Mr. Dearth had left the firm by the time I sent the letter, and Mr. Graham advised me the [sic] Mr. T. Barrett Wood had taken over the case. I forwarded the letter to Mr. Wood. No one objected to my accepting the appointment.

After carefully considering the Respondents' request and Claimant's response in accordance with the American Health Lawyers Association Code of Ethics for Arbitrators 3.02b,³ I have determined not to withdraw because the reason for the challenge is not substantial, I believe I can act and decide the case impartially and fairly, and my withdrawal at this time would cause undue delay and expense to the claimant.

During the final arbitration hearing in August 2008, the Moores alleged for the first time that Graham did not have authority to represent them in the arbitration. Debora Moore testified that she was unaware of the arbitration proceedings until she received a bill from T. Barrett Wood, who she believed had been retained by Graham. Moore knew Graham was assisting with the audit. She called Graham and asked him what right he had to move past the audit. It was not until Graham turned over the file that she learned he had purported to represent them in the arbitration. The Moores then hired Silva to represent them in the arbitration proceeding.

Hobbs issued a written decision on September 12, 2008, finding:

• The Moores breached the recruiting agreement by failing to allow an audit of their books and records;

• Dr. Debora Moore breached the recruiting agreement because she failed to engage in the private practice of medicine as a urologist on a full-time permanent basis;

• Las Palmas breached the recruiting agreements by placing both physicians on call without a weekend off for seven weekends during the term of the recruiting agreements;

• The Moores failed to prove that Las Palmas breached the recruiting agreements by failing to forgive part of the debt owed by them;

• The Moores failed to prove their claim that Las Palmas breached the recruiting agreements by treating them as one doctor in the assignment of operating rooms; and

• The Moores failed to prove that Las Palmas was unjustly enriched by placing them on call for six weekends.

The arbitrator awarded Las Palmas damages: (1) against both doctors in the amount of $23,000 for their failure to allow an audit, and (2) against Dr. Debora Moore in the amount of $915,775 for her failure to work full-time as a urologist. The arbitrator also awarded Las Palmas attorneys' fees in the amount of $139,104. These awards were partially offset by: (1) $438.73 awarded to Dr. Debora Moore for Las Palmas' failure to timely pay her sign-on bonus and advance net collectible revenue; (2) $6,300 awarded to the Moores for Las Palmas' failure to provide them with one weekend a month off call; and (3) $15,818 in attorney's fees for the prosecution of the Moores' counterclaims. The net amount of the award to Las Palmas is $1,055,322.27 together with 5 percent post-judgment interest.

On September 15, 2008, Las Palmas filed a petition to confirm the arbitration award and enter judgment. The Moores filed an answer raising the following affirmative defenses to confirmation: (1) the award was obtained by corruption, fraud, or other undue means; (2) Appellees' rights were prejudiced by the evident partiality of the arbitrator; (3) the arbitrator took on the role of an advocate which constituted willful behavior and/or misconduct; (4) the arbitrator refused to hear material evidence by limiting the testimony of an expert witness; (5) the arbitrator was biased; and (6) the arbitrator failed to strictly construe ambiguities in...