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. , 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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