Michael Wolgin

In a suit by an auto body company against a captive insurance company for rescission of certain workers compensation reinsurance participation agreements, for disgorgement of $70,000 paid thereunder, and for fraud, breach of contract, and unfair business practices, the court compelled arbitration of all claims. The auto body company argued that arbitration should not be compelled because a clause within the arbitration agreement stated that it was “only intended to provide a mechanism for resolving accounting disputes in good faith” (the dispute here did not involve an accounting dispute). The court, however, interpreted the entire arbitration agreement to find that the agreement “was intended to govern all disputes arising from the parties’ commercial transaction, not merely accounting disputes.” The court further found that the language in the arbitration agreement providing that the arbitrator would decide the “construction and enforceability” of the agreement delegated to the arbitrator the threshold question of whether the dispute was arbitrable. The court bolstered this finding by holding that the agreement’s incorporation of the AAA Rules, which provide that parties must arbitrate the arbitrability of a dispute, is another “clear and unmistakable delegation provision.” Accordingly, the court delegated to the arbitrator the auto body company’s contentions that the reinsurance agreements were unlawful and that a condition precedent to arbitration had not been satisfied. Mike Rose’s Auto Body, Inc. v. Applied Underwriters Captive Risk Assurance Co., Case No. 16-cv-01864 (USDC N.D. Cal. Sept. 28, 2016).

This post written by Michael Wolgin.

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A physician sued several healthcare entities for wrongful termination of employment, negligence, breach of contract, and tortious interference with at-will employment. While two of the defendants were signatories to plaintiff’s employment agreement which contained an arbitration clause, the other defendants were not. Noting that Texas law expressly recognizes the theory of “direct benefits” estoppel, the trial court reasoned that because the defendants’ liability under the tortious interference claim could not be determined without reference to the employment agreement, the plaintiff must arbitrate that claim. Regarding the plaintiff’s other claims, the trial court applied the theory of “intertwined claims” estoppel and required the plaintiff to arbitrate those claims as well.

On appeal, the Fifth Circuit affirmed the trial court’s rulings, including the application of intertwined claims estoppel. The court explained that intertwined claims estoppel involved compelling arbitration when a non-signatory defendant has a “close relationship” with a signatory and the claims are “intimately founded in and intertwined with the underlying contract obligations.” Relying on a Texas Supreme Court case that “intimated at the validity of” the theory, on lower courts in Texas that applied the theory, and on the fact that arbitration of disputes is strongly favored under federal and state policy, the Fifth Circuit determined that the “Texas Supreme Court, if faced with the question, would adopt intertwined claims estoppel.” Finding that plaintiff regarded all of the defendants as closely related by failing to differentiate his factual allegations for each claim, and that the claims at issue closely related to plaintiff’s alleged wrongful termination, the Fifth Circuit affirmed. Hays v. HCA Holdings, Inc., Case No. 15-51002 (5th Cir. Sept. 29, 2016).

This post written by Gail Jankowski, a law clerk at Carlton Fields in Washington, DC.

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