[Dis-res] RDDR 11/29/04

[Diane E Gould]

Recent Developments in Dispute Resolution
Willamette University College of Law
Center for Dispute Resolution
November 15-19, 2004
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THIS ISSUE - November 29, 2004:

1.  Arbitration:  An arbitration clause contained within a contract
subject to statutory recission, is still enforceable.  (Ill., November 18,
2004)

2.  Arbitration:  A court should give deference to the arbitration panel
when reviewing its interpretation of a “last chance” employment agreement.
However, if the panel’s interpretation is not an arguable construction of
the agreement, the panel exceeded their authority, and the award is invalid.
(5th Cir., November 15, 2004)

3. Dispute Resolution:  A party to a binding dispute resolution procedure
may not withdraw its claims once the fact-finder has concluded the
evidentiary stage of the proceedings. (Fla. App., November 17, 2004)

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CASE SUMMARIES:

Arbitration:  An arbitration clause contained within a contract subject to
statutory recission, is still enforceable.

Jensen v. Quik International, et. al.  2004 WL 2609913 (Ill., November 18,
2004)

Jensen sued Quik to rescind his franchisee agreement and for damages under
the Illinois Franchise Disclosure Act of 1987 (Act).  Quik failed to
register as a franchise with the Illinois Attorney General’s Office before
entering its contract with Jensen.  Quik sought to stay litigation in
order to enforce the arbitration clause in the franchise agreement.  The
district court considered Quik’s registration as a franchise to be a
condition precedent to the formation of a valid contract with Jensen,
concluding therefore that no contract existed between the parties.  The
appellate court affirmed, finding that the question of whether a contract
existed between the parties was a question of law for the courts, not a
matter for arbitration.  The Supreme Court of Illinois reversed, holding
that the plain language of the Act and public policy required enforcement
of the arbitration clause.  The remedies in the Act are contract recission
and damages.  The presumption underlying a recission remedy is that an
otherwise enforceable contract exists between the parties.  Secondly,
public policy strongly favors arbitration, and if parties succeeded in
avoiding arbitration clauses by alleging that no contract existed, the
policy would be undermined.   (DG)

Full opinion available online at:
http://www.state.il.us/court/Opinions/SupremeCourt/2004/November/Opinions/Html/97704.htm

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Arbitration:  A court should give deference to the arbitration panel when
reviewing its interpretation of a “last chance” employment agreement. 
However, if the panel’s interpretation is not an arguable construction of
the agreement, the panel exceeded their authority, and the award is
invalid.

Continental Airlines v. Teamsters 2004 WL 2591957 (5th Cir., November 15,
2004)

Mark Johnson worked for Continental Airlines as an airplane mechanic. 
During his employment, Continental administered a random alcohol breath
test, which Johnson failed.  Continental terminated Johnson, who filed a
grievance along with the Teamsters union.  Continental allowed Johnson to
return to work, provided he sign a “last chance agreement” (LCA), which
set forth a litany of rules for Johnson to follow.  The LCA forbade
Johnson from drinking alcohol, including medication containing alcohol. 
During his probationary period, Johnson used an over the counter cough
medication containing alcohol.  Johnson contacted his doctor’s office, but
was unable to get an appointment.  The office orally gave him permission
to him to use an over-the-counter medication containing alcohol, but
Johnson’s doctor never provided written permission as required by the LCA.
 Johnson left a voicemail with his contact at Continental, telling him
that he was using the medicine.  The voicemail was never returned.  Two
days later, Continental tested Johnson, found alcohol in his system, and
fired him.  The union filed a grievance on behalf of Johnson.  The panel
ruled that Continental wrongfully terminated Johnson, and reinstated him
with back pay.  Continental filed in district court to have the award
vacated.  The trial court granted summary judgment to the union.
Continental appealed, arguing that the trial court had applied the wrong
standard of review by giving deference to the panel’s decision. The Fifth
Circuit Court of Appeals reversed and entered summary judgment for
Continental, holding that, although arbitration decisions deserve
deference, this panel exceeded its authority because their interpretation
was not an arguable construction of the plain language of the LCA.   
(GWM)

Complete Opinion:
http://caselaw.lp.findlaw.com/data2/circs/5th/0420136p.pdf

*****
Dispute Resolution:  A party to a binding dispute resolution procedure may
not withdraw its claims once the fact-finder has concluded the evidentiary
stage of the proceedings.

Health Care Options, Inc. v. Agency for Health Care Administration and
Baycare Health System, Inc., 2004 WL 2600422 (Fla. App., November 17,
2004)

Health Care Options (HCO) appeals from an order of the Agency for Health
Care Administration (AHCA). HCO, an HMO, contracted with BayCare, a group
of hospitals, to provide medical services for their clients. For three
months after the contract expired, BayCare continued to provide services
to HCO’s clients. BayCare billed for the services at the expired
contracted rate. HCO responded by paying BayCare 120% of the Medicare
reimbursement rate. BayCare invoked the ADR procedure set forth in a
Florida statute to resolve disputes between HMOs and health care
providers.  Maximus, an independent third party dispute resolution entity,
took the cases and, after fact-finding in five of the eight cases, made
recommendations to AHCA that were favorable to HCO’s reimbursement
position.  BayCare then withdrew all eight cases from the ADR process
before AHCA issued its final order. Maximus recommended AHCA’s acceptance
of the withdrawal requests and its dismissal of all cases. HCO appealed
AHCA’s order dismissing the cases.  The court reviews AHCA’s
interpretation of the statute de novo.  Analyzing the legislative history
and intent of the Florida statute, the district court found that the ADR
process was intended to be binding on the parties. Because Maximus had
finalized the evidentiary stage of the proceedings in five of the eight
cases, the district court held that BayCare was barred from withdrawing
those claims from further review.  (CT)

Opinion available online at: Westlaw

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Writers:  Forrest Collins, Alycia Huskins, Geoffrey McCann, Daniel
Rayfield, Kathryn Kellogg Runkle, and Cheryl Taylor
Editor:  Diane Gould
Faculty Advisors:  Richard Birke and A. Lee Jordan
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