Opinion
NO. 3-01-CV-2246-M
March 28, 2002
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Defendant United HealthCare Insurance Company ("UHC") has filed a second motion to dismiss or, alternatively, to compel arbitration. For the reasons stated herein, the motion should be granted.
I.
Plaintiff Richard H. Weiner is a podiatrist who provides medical services to patients insured under various health insurance plans pursuant to a fee-for-service arrangement with their insurance companies. Under this arrangement, the insurance company agrees to pay the healthcare provider directly for medical services rendered to covered patients in exchange for discounted fees for those services. Such an arrangement exists between plaintiff and UHC for patients insured under a self-funded benefit plan provided by Associates Corporation of North America, a subsidiary or affiliate of CitiCorp. (UHC Br. at 2-3, ¶¶ 5-6).
On September 7, 2001, plaintiff sued CitiCorp in the Justice of the Peace Court, Precinct 3, of Dallas County, Texas. His one-page pro se petition alleged that "defendant is justly indebted to the plaintiff in the sum of $423.00 . . . based on the following facts: nonpayment of medical services on patient Jane M. Newman (Mary Jane Carver), ID #461171665, Group #199921, date of service 6-8-01." (UHC Not. of Rem., Exh. A-1). Six weeks later, plaintiff amended his petition to join UHC as a party. ( Id., Exh. A-3). Believing that plaintiff was seeking payment for medical services rendered to a participant of an employee welfare benefit plan, UHC timely removed the case to federal court on the basis of ERISA preemption. ( Id. at 2, ¶ 3). Plaintiff then filed a motion to remand the case to state court. The motion was denied because the only viable claim alleged by plaintiff in his state court petition was as "the assignee of an ERISA plan beneficiary." FINDINGS REC. OF MAG. JUDGE, 11/21/01 at 2, adopted by ORDER, 12/19/01.
On February 22, 2001, plaintiff sought leave to amend his complaint to assert claims against UHC for quantum meruit, breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Theft Liability Act. According to plaintiff, UHC "routinely refuses to pay fully the physicians' charges and often refuses to pay the physician at all." (Plf. Third Am. Compl. at 5, ¶ IV). In particular, plaintiff complains that UHC does not fully disclose the methodology it uses to determine whether a claim will be paid, which renders the fee-for-service agreement invalid for lack of an essential price term. Plaintiff therefore seeks recovery in quantum meruit for the value of his services. ( Id. at 9-10, ¶ IV). Alternatively, plaintiff alleges that UHC breached the fee-for-service agreement by unilaterally reducing and delaying payments for medical services provided to his patients. ( Id. at 11-13, ¶ IV). By order dated February 26, 2002, the Court allowed plaintiff to file this amended complaint.
Plaintiff's amended complaint also includes a section entitled "issues involving arbitration." Among the issues" presented for determination are: (1) whether the mandatory arbitration provision in the fee-for-service agreement is valid and enforceable; (2) whether plaintiffs claim under the Texas Theft Liability Act is within the scope of the arbitration provision; and (3) whether a federal court can order arbitration under the Texas General Arbitration Act. (Plf. Third Am. Compl. at 16-17, ¶ IX). The Court will construe these allegations as a claim for declaratory relief under the Texas Declaratory Judgment Act, TEX. CIV. PRAC. REM. CODE ANN. § 31.001, et seq. (Vernon 1997 Supp. 2001).
UHC now moves to dismiss this case or, alternatively, to compel arbitration. Under the terms of the provider agreement between plaintiff and UHC, the parties agreed to resolve any disputes, disagreements, or controversies through binding arbitration instead of litigation. Included within the scope of this arbitration clause are plaintiffs claims for payment for medical services provided to Newman. Plaintiff was invited to file a response to the motion by March 22, 2002. However, no response has been filed.
The HealthTexas Provider Network executed a provider agreement with Metrallealth Care Plan of Texas, Inc. and the MetraHealth Insurance Company effective January 1, 1996. Sometime thereafter, the MetraHealth entities were acquired by United HealthCare Corporation. MetraHealth Insurance Company changed its name to United HealthCare Insurance Company and MetraHealth Care Plan of Texas, Inc. changed its name to United HealthCare of Texas, Inc. The parties entered into another provider agreement effective June 11, 1998. That agreement contains the arbitration clause at issue in this case. ( See UHC Br., Beaty Aff. at 1-2, ¶¶ 3-7).
Although plaintiff has not filed a response to the motion, he did respond to a similar motion filed by UHC in another case between the same parties. Weiner v. United HealthCare of Texas, Inc., No. 3-01-CV-1875-R. The Court will consider that response in the instant case.
II.
The Physician Group Services Agreement between plaintiff and UHC provides, in relevant part:
7.1 The Parties will work together in good faith to resolve any disputes about their business relationship. As to any matter of disagreement, dispute or controversy between or among the Parties not resolved by informal means which relates to the subject matter of this agreement and arises after the Effective Date, any Party to such disagreement, dispute or controversy may as its exclusive remedy, demand that it be submitted to binding arbitration.
7.5 Each of the Parties agrees that it will not file (nor will it cause any other Person to file) any suit, motion, petition or otherwise commence any legal action or proceeding which may by [sic] submitted to arbitration pursuant to this Agreement.
(UHC App., Exh. A-3 at 30-32, ¶ 7.1 7.5). The provider agreement further specifies that it "shall be construed and enforced according to the laws of the State of Texas without regard to that State's principles of conflicts of laws." ( Id., Exh. A-3 at 28, ¶ 6.8). Consequently, the resolution of UHC's motion is governed by the Texas General Arbitration Act rather than the Federal Arbitration Act. See Volt Information Sciences, Inc. v. Board of Trustees of the Leland Stanford Junior University, 489 U.S. 468, 477-79, 109 S.Ct. 1248, 1255-56, 103 L.Ed.2d 488 (1989); Al's Formal Wear of Houston, Inc. v. Sun, 869 S.W.2d 442, 443 n. 3 (Tex.App. — Houston [1st Dist.] 1993, writ denied). See also Tuco, Inc. v. Burlington Northern Railroad Co., 912 S.W.2d 311, 314-15 (Tex.App.-Amarillo 1995), as modified, 960 S.W.2d 629 (Tex. 1997) (Texas General Arbitration Act is consistent with and not preempted by Federal Arbitration Act).
The decision whether to compel arbitration involves a two-step inquiry. First, the Court must determine whether a valid, enforceable arbitration agreement exists. ASW Allstate Painting Construction Co. v. Lexington Insurance Co., 188 F.3d 307, 311 (5th Cir. 1999); Henry v. Gonzalez, 18 S.W.3d 684, 688 (Tex.App. — San Antonio 2000, pet. dism'd by agr.). The burden is on the party seeking to compel arbitration to establish the existence of such an agreement. Henry, 18 S.W.3d at 688-89. If the party meets that burden, a presumption in favor of arbitration arises. Id. at 689. The burden then shifts to the party opposing arbitration to show that the agreement is not enforceable or the dispute does not come within the scope of the agreement to arbitrate. Id.
A.
Plaintiff does not dispute that an arbitration agreement exists. Instead, he maintains that the provider agreement itself is invalid and unenforceable for lack of an essential price term and because UHC breached the contract. (Plf. Resp. at 6-8). This clearly is not sufficient to forestall arbitration. Under the Texas General Arbitration Act, an arbitration clause is separable from the contract as a whole. Henry, 18 S.W.3d at 690. An attack on the greater contract does not necessarily invalidate the agreement to arbitrate. Id.; see also Dallas Cardiology Associates, P.A. v. Mallick, 978 S.W.2d 209, 213 (Tex.App. — Dallas 1998, pet. denied); Pepe International Development Co. v. Pub Brewing, 915 S.W.2d 925, 932 (Tex.App. — Houston [1st Dist.] 1996, no writ). Thus, any question regarding the validity of the contract must be determined by the arbitrator, not the courts. Smith v. H.E. Butt Grocery Co., 18 S.W.3d 910, 913 (Tex.App. — Beaumont 2000, pet. denied).
Having determined that an arbitration agreement exists, the burden falls to plaintiff to demonstrate that the agreement is unenforceable. Unconscionability is one such defense to enforcement of an arbitration agreement. Hearthshire Braeswood Plaza Limited Partnership, SMP v. Bill Kelly Co., 849 S.W.2d 380, 386 (Tex.App.-Houston [14th Dist.] 1993, writ denied). Although not framed in terms of unconscionability, plaintiff does allege that there was a gross disparity in bargaining power between himself and UHC because he was required to accept the terms of the provider agreement in order to treat patients. (Plf. Resp. at 5). Several Texas courts have held that, in the context of an employer-employee relationship, such disparities do not establish unconscionability per se. See EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90-91 (Tex. 1996); Smith, 18 S.W.3d at 912; In re Turner Brothers Trucking Co., 8 S.W.3d 370, 377 (Tex.App. — Texarkana 1999, mand. denied); Dillee v. Sisters of Charity, 912 S.W.2d 307, 309-10 (Tex.App.-Houston [14th dist.] 1995, no writ). The Court sees no reason why this rule should not be equally applicable in the present circumstances. Nor does the fact that plaintiff never received a copy of the provider agreement make the contract unconscionable. See Southwest Health Plan, Inc. v. Sparkman, 921 S.W.2d 355, 358 (Tex.App. — Fort Worth 1996, no writ).
Plaintiff does not suggest that his claims fall outside the scope of the arbitration agreement. Indeed, all of his claims "relate to the subject matter" of the Physician Group Services Agreement. ( See UHC App., Exh. A-3 at 48, ¶ 7.1).
At least one Texas intermediate appellate court has held that a disparity in bargaining power may be unconscionable where the plaintiff was functionally illiterate and no one had explained the agreement to him before it was signed. In re Turner Brothers Trucking, 8 S.W.3d at 377. Obviously, this holding does not apply to plaintiff, who is a board-certified podiatrist with at least 20 years of formal education.
B.
Where a valid arbitration agreement has been established, the trial court must order the parties to arbitrate. TEX. Civ. PRAC. REM. CODE ANN. § 171.021(a) (Vernon 1997 Supp. 2001); ASW Allstate Painting, 188 F.3d at 311. The Texas General Arbitration Act further provides that the court must stay all further proceedings in favor of arbitration. TEX. CIV. PRAC. REM. CODE ANN. § 171.021(c). However, a stay is not warranted in this case. Notwithstanding the language of the statute, a district court is not precluded from dismissing an action where all issues are properly subject to arbitration. Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674, 678 (5th Cir. 1999) (interpreting similar provision in Federal Arbitration Act); Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992). Clearly, that rule should apply here. The arbitration provision is all-encompassing and serves as the exclusive remedy for resolving "any disagreement, dispute or controversy between or among the Parties . . . which relates to the subject matter of this agreement. . ." (UHC App., Exh. 3 at 49, ¶ 7.1). The only possible role a court could have would be to review the arbitration award once the proceedings are concluded. See Alford, 975 F.2d at 1164. Under these circumstances, the case should be dismissed rather than stayed.
RECOMMENDATION
UHC's second motion to dismiss or, alternatively, to compel arbitration should be granted. Plaintiff's claims against this defendant should be dismissed without prejudice in favor of arbitration.