Specialty Healthcare v. St. Mary Parish Hosp.

• Decision Date: 31 July 2000
• Docket Number: No. 99-30977,No.1,1,99-30977
• Parties: (5th Cir. 2000) SPECIALTY HEALTHCARE MANAGEMENT, INC., Plaintiff-Appellee, v. ST. MARY PARISH HOSPITAL, ETC., ET AL., Defendants, ST. MARY PARISH HOSPITAL, SERVICE District, doing business as Franklin Foundation Hospital, Defendant-Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 650

220 F.3d 650 (5th Cir. 2000)

SPECIALTY HEALTHCARE MANAGEMENT, INC., Plaintiff-Appellee, v. ST. MARY PARISH HOSPITAL, ETC., ET AL., Defendants, ST. MARY PARISH HOSPITAL, SERVICE District No.1, doing business as Franklin Foundation Hospital, Defendant-Appellant.

No. 99-30977

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

July 31, 2000

Appeal from the United States District Court For the Western District of Louisiana

Before REYNALDO G. GARZA, JOLLY, and HIGGINBOTHAM, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

This diversity case arises out of an effort to enforce an arbitral award by a federal order directed at a Parish hospital in Louisiana. Franklin Foundation Hospital appeals the district court's grant of a writ of execution and an award of attorney fees in favor of Specialty Healthcare Management Inc. because the Louisiana Constitution provides that "no public property or public funds shall be subject to seizure." We find that Louisiana law here controls; that neither the hospital's consent to binding arbitration nor its contention in resisting a preliminary injunction that Specialty's injuries were not irreparable waived its protections under the Louisiana Constitution. We VACATE the grant of a writ of execution and the award of attorney fees.

I

In August 1993, St. Mary Parish Hospital Service District No. 1, d/b/a Franklin Foundation Hospital ("the hospital"), agreed with NME Management Services, Inc. ("NMMS") that NMMS would manage, staff, and operate an inpatient rehabilitation treatment program at the hospital, a small thirty-five bed facility. Approximately a year later, the hospital agreed to NMMS's assignment of its management contract to Specialty Healthcare Management, Inc. ("Specialty"). Specialty assumed all of NMMS's obligations under the agreement.

The relationship did not fare well. The hospital gave Specialty notice in November 1996 that Specialty had not complied with their agreement. Two months later the hospital terminated the agreement.

Specialty sued the hospital in the United States District Court, alleging diversity jurisdiction. It sought monetary damages, as well as declaratory and injunctive relief. The hospital demanded arbitration, which was mandatory under the agreement. The hospital also successfully resisted a preliminary injunction, urging that an injunction was inappropriate in part because monetary damages were calculable and thus Specialty would suffer no irreparable injury, a matter we will return to. Specialty dismissed the suit, and the parties arbitrated in accordance with the laws of Louisiana.

Specialty received an arbitration award of nearly $750,000 plus interest and sought confirmation of the award in the district court, pursuant to 9 U.S.C. § 9.¹ The court confirmed the award in a judgment, requiring the hospital to pay the award within 30 days. When the hospital refused to pay, Specialty sought a writ of execution under Rule 69(a).² The hospital argued that Louisiana's antiseizure provision controls. The district court granted Specialty's request for a writ of execution and attorney fees, and this appeal ensued.

II

Federal Rule of Civil Procedure 69(a) provides that the

[p]rocess to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise. The procedure on execution, in proceedings supplementary and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, . . ., except that any statute of the United States governs to the extent that it is applicable.

Article 12, § 10 of the Louisiana Constitution permits suits against the State and its political subdivisions, but subsection (C) states that "no public property or public funds shall be subject to seizure." The hospital is a hospital service district that was created by the St. Mary Parish Policy Jury. Thus, under state law, the hospital is a political subdivision of Louisiana whose assets are exempt from seizure.³

Under Rule 69(a), state procedure on execution would govern unless a federal statute otherwise applied.⁴ The arbitral award was confirmed under 9 U.S.C. § 9 of the Federal Arbitration Act.⁵ Neither § 9 nor any other portion of the FAA provides any additional procedures for enforcing confirmed awards. Instead, § 13 of the FAA specifically provides that a confirmed arbitral award "may be enforced as if it had been rendered in an action in the court in which it is entered." Thus, for awards confirmed in federal court, Rule 69(a) and its incorporation of state procedure remains the governing rule, at least on the surface.

Nevertheless, federal interests sometimes trump the substance of a state's antiseizure provision by means other than Rule 69(a). For example, in civil rights cases, this circuit has held that it is within the scope of federal power to command state officials to pay judgments from state funds, such as judgments for attorney fees under 42 U.S.C. § 1983, despite the existence of state antiseizure provisions, even though a writ of execution is not issued.⁶ One justification for this result is that Congress under its section 5 powers of the Fourteenth Amendment chose to enact legislation to permit all successful civil rights litigants to recover attorney fees; thus, there is a federal interest in the monetary remedy.⁷

The Eastern District of Michigan, in City of Detroit v. City of Highland Park,⁸ stated that "it is inconceivable that state and local entities can thwart federal courts' ability to enforce judgments 'through the adoption of immunizing procedures and vague statutory schemes.'"⁹ In that case, the court upheld the use of a writ of mandamus ordering Highland Park to pay money to Detroit for Detroit's provision of water services mandated by federal law: the Clean Water Act.¹⁰

Assuming a federal court has the power to compel the payment of money in contravention of state execution provisions so long as there is a federal interest in the remedy, we must determine whether such a federal interest exists in the current case. Specialty argues that this case implicates a federal interest in arbitration created by the FAA that includes an interest in successful enforcement. The hospital argues that the FAA was invoked solely as a procedure to confirm the award and that the FAA expresses no federal interest in the scope or manner of execution.

Of course, even if the FAA was invoked solely to confirm the award, this does not mean that the parties agreement to arbitrate was not controlled by the FAA. The FAA is "applicable to any arbitration agreement within the coverage of the Act"¹¹ which includes written agreements to arbitrate if the contract "evidenc[es] a transaction involving commerce."¹² Assuming that the parties' management agreement involved "commerce," a broadly construed term under the FAA,¹³ the parties' agreement to arbitrate was governed by the FAA, a creature of federal law.

The FAA, however, does not preempt all state law related to arbitration agreements. It "contains no express pre-emptive provision, nor does it reflect a congressional intent to occupy the entire field of arbitration."¹⁴ Thus, the question is simply whether Louisiana's antiseizure provision "would undermine the goals and policies of the FAA."¹⁵

The FAA's primary goal is to place agreements to arbitrate "on the same footing as other contracts."¹⁶ As such, the FAA "requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms."¹⁷ Moreover, "[a]rbitration under the [FAA] is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit."¹⁸ Based on these principles, an agreement to arbitrate under the laws of a particular state will be enforced as written, even if that state's arbitration laws differ from federal arbitration law.¹⁹

In this case, the parties' agreement included a Louisiana choice of law provision and an arbitration clause that required binding arbitration under the laws of Louisiana. Specialty contends that such an agreement waived reliance on state antiseizure provisions. The hospital responds that while it agreed to binding arbitration, such an agreement only meant that liability and damage findings would be binding, not that Specialty could enforce the award through any means of execution.

Under Louisiana law, arbitration is defined as "bind[ing] [the parties] reciprocally to perform what shall be arbitrated."²⁰ At best, this definition might be interpreted to require a party who consents to binding arbitration to perform an arbitral award of specific performance. However, we do not read this general definition to invalidate Louisiana's specific antiseizure provisions in all agreements to arbitrate.²¹ There is no evidence suggesting that Louisiana intended arbitration agreements to automatically strip political subdivisions of the background protections they would otherwise enjoy.

Because we find that Louisiana's antiseizure provisions remained part of the law under which the parties agreed to arbitrate, we see that the primary policy of the FAA is furthered rather than frustrated when those provisions are applied to the execution of a confirmed arbitral award. This conclusion is buttressed by the fact that under § 13, a judgment resulting from a confirmed arbitral award

shall have the same force and effect, in all respects, as, and be subject to all provisions of law relating to, a judgment in an action.²²

Thus, unless the parties have otherwise agreed, the FAA expresses no separate interest in making confirmed arbitral award more powerful than comparable court judgments. Had the current state contract dispute been litigated in federal court under diversity jurisdiction, the resulting judgment would have been enforceable according to Rule 69(a), which...