HLD, v. 33, n. 7 (July 2005)
Texas Supreme Court Holds Medicare Payments
Constitute Interstate Commerce Thereby Bringing Arbitration Agreement Under FAA
that Medicare paid for services rendered to a patient whose wife sued the
hospital where he died brought an arbitration agreement within the purview of
the Federal Arbitration Act (FAA), the Texas Supreme Court held May 27.
Marjorie Lyman sued Humble
Healthcare Center (HHC) for damages under the Texas Wrongful Death Act and the
Texas Survival Statute after her husband died at the facility. At the time of
his admission, Lyman had signed an arbitration agreement with HHC. The trial
court denied HHC's motion to compel arbitration under
the Texas Arbitration Act (TAA). HHC then moved for reconsideration and to
compel arbitration under the FAA based on the fact that it was reimbursed by
Medicare for services rendered to Lyman's husband. The trial court denied HHC's motion.
The Texas Supreme Court conditionally
granted HHC's writ of mandamus and directed the trial
court to compel arbitration of all Lyman's claims pursuant to the FAA. The high
court first rejected Lyman's contention that HHC waived its right to arbitrate
under the FAA because it argued only the TAA in its first motion for
arbitration. The high court concluded that HHC preserved its right to arbitrate
under the FAA by providing evidence in its subsequent motion to reconsider.
The high court also rejected
Lyman's contention that insufficient evidence of interstate commerce existed to
compel arbitration under the FAA. The high court concluded that the evidence of
Medicare payments made to HHC on behalf of Lyman's husband "is sufficient to
establish interstate commerce and the FAA's application in this case."
The high court agreed with HHC that
the FAA pre-empted the TAA. Here, two factors of the pre-emption analysis are
undisputed--that the agreement was in writing and was an enforceable contract. As
concluded earlier, the agreement involved interstate commerce because HHC was
reimbursed by Medicare for the services provided to Lyman's husband. Finally,
the high court found that the "TAA interferes with the enforceability of the
arbitration agreement by adding an additional requirement--the signature of a
party's counsel--to arbitration agreements in personal injury cases." Thus, the
high court held the FAA pre-empted the TAA.
In Re Nexion
Health at Humble, Inc., No. 04-0360 (Tex.
May 27, 2005). To read the case, go to http://www.supreme.courts.state.tx.us/historical/2005/may/040360.pdf