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Texas Supreme Court Holds Medicare Payments Constitute Interstate Commerce Thereby Bringing Arbitration Agreement Under FAA

 
 

HLD, v. 33, n. 7 (July 2005)

Texas Supreme Court Holds Medicare Payments Constitute Interstate Commerce Thereby Bringing Arbitration Agreement Under FAA

            The fact 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

 

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