East Texas Medical Center Regional Healthcare System v. Slack

916 F. Supp. 2d 719, 2013 WL 56136, 2013 U.S. Dist. LEXIS 1126
CourtDistrict Court, E.D. Texas
DecidedJanuary 3, 2013
DocketCivil Action No. 2:12-CV-00307
StatusPublished
Cited by1 cases

This text of 916 F. Supp. 2d 719 (East Texas Medical Center Regional Healthcare System v. Slack) is published on Counsel Stack Legal Research, covering District Court, E.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
East Texas Medical Center Regional Healthcare System v. Slack, 916 F. Supp. 2d 719, 2013 WL 56136, 2013 U.S. Dist. LEXIS 1126 (E.D. Tex. 2013).

Opinion

MEMORANDUM OPINION AND ORDER

RODNEY GILSTRAP, District Judge.

Before the Court are Defendants Pharmaceutical Technologies, Inc. (“PTI”) and Douglas M. Pick’s (“Pick”) Motion to Compel Arbitration, filed June 15, 2012 (Dkt. No. 12), and Defendant Angela Pieper’s (“Pieper”) Motion to Compel Arbitration, filed December 5, 2012 (Dkt. No. 76). The Court having considered the same finds [721]*721that both motions should be DENIED for the reasons set forth below.

I. Factual and Procedural Background

Plaintiff East Texas Medical Center Regional Healthcare System (“RHS”) is a regional healthcare system providing a variety of health care services, including administrative services for employee health care benefit plans through HealthFirst TPA, Inc. (“HealthFirst”). HealthFirst is a wholly-owned subsidiary of East Texas Medical Center Regional Health Services, Inc., which is a wholly-owned subsidiary of RHS. HealthFirst is not a party to this litigation. Defendant Thomas W. Slack (“Slack”) was an officer of both RHS and HealthFirst. RHS alleges that Defendant Sharper Aviation Solutions, Inc. (“Sharper”) was a for-profit business corporation wholly owned by Slack.

Defendant PTI is in the business of designing performance network pharmacy concepts and operates a pharmacy benefits manager for employee health care plans. At all relevant times hereto, Defendant Pick was PTI’s CEO and Defendant Pieper was PTI’s CFO. Defendant Ricky Rose (“Rose”) was a former employee of Health-First and later an agent of PTI.

HealthFirst and PTI had entered into a Pharmacy Benefits Administration Agreement (the “Agreement”), which contains an arbitration clause compelling the signatories to settle by arbitration any controversy or claim arising out of the Agreement. In its Complaint, RHS alleges that the defendants committed various acts of racketeering and breaches of fiduciary duties in connection with the Agreement. Prior to RHS filing its Complaint, HealthFirst filed a petition in Smith County District Court, based on much of the same underlying acts and breaches as the present case, against Slack, Sharper, and PTI, among other defendants not party to the present case. There, pursuant to an agreed motion jointly filed by HealthFirst and PTI, the state court referred the breach of contract claim between HealthFirst and PTI to arbitration, which is currently pending.

Defendants PTI and Pick move the Court to compel RHS to arbitrate pursuant to the arbitration clause in the Agreement and to stay all proceedings pertaining to their claims. Defendant Pieper, in a separate motion, essentially re-urges PTI and Pick’s motion to compel arbitration and to stay proceedings. In analyzing these motions, the Court will address both motions jointly and as a single motion.

II. Analysis

a. Motion to Compel Arbitration

Courts perform a two-step inquiry to determine whether to compel a party to arbitrate. Dealer Computer Servs. v. Old Colony Motors, Inc., 588 F.3d 884, 886 (5th Cir.2009). First, the court must determine whether the parties agreed to arbitrate the dispute. Id. Second, the court must determine whether any applicable federal statute or policy renders the claims nonarbitrable. Id. With respect to the first inquiry, there are two considerations: whether a valid agreement to arbitrate exists and whether the dispute falls within that agreement. Id. Here, RHS is not a signatory to the Agreement and has not agreed to arbitrate.

In limited circumstances, however, a non-signatory to an agreement containing an arbitration clause may be compelled to arbitrate in accordance with that clause. See, e.g., Bridas S.AP.I.C. v. Gov’t of Turkmenistan, 345 F.3d 347, 356 (5th Cir. 2003) (“Ordinary principles of contract and agency law may be called upon to bind a nonsignatory to an agreement whose terms have not clearly done so.”) (citing E.I. DuPont de Nemours & Co. v. Rhone Poulenc, 269 F.3d 187 (3d Cir.2001); [722]*722Thomson-C.S.F., S.A. v. American Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995)); id. at 358 (“Arbitration agreements apply to nonsignatories only in rare circumstances.”) (citing Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th Cir.2002)). The Fifth Circuit has recognized six theories for binding a non-signatory to an arbitration agreement: (a) incorporation by reference; (b) assumption; (c) agency; (d) veil-piercing/alter ego; (e) estoppel; and (f) third-party beneficiary. Id. at 356 (citing Thomson-C.S.F., 64 F.3d at 776; DuPont, 269 F.3d at 195-97).

Of the six theories for binding a non-signatory to an arbitration agreement, Defendants Pick, PTI, and Pieper (“Defendants”) argue that RHS has an agency relationship with HealthFirst. Defendants however have the burden of proving that HealthFirst signed the Agreement as an agent of RHS and not for themselves alone. See id. at 356. “Agency is ‘the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.’ ” Id. at 356-57 (citing Restatement (Second) of Agency § 1(1) (1958)). Defendants argue that RHS has an agency relationship with HealthFirst based merely on the fact that HealthFirst is a wholly owned subsidiary of RHS. A corporate relationship alone, however, is generally not sufficient to bind a non-signatory to an arbitration agreement. See, e.g., Zurich Am. Ins. Co. v. Watts Indus., 417 F.3d 682, 688 (7th Cir. 2005) (citing Thomson-C.S.F., 64 F.3d at 777). Defendants present no farther argument supporting an agency relationship, and do not present argument under any other theory for binding a non-signatory to an arbitration agreement. Accordingly, the Court finds that Defendants’ motion to compel arbitration should be and is hereby DENIED.

b. Motion to Stay

In the course of arguing its motion to compel arbitration, Defendants cite case law addressing whether a non-signatory defendant can obtain a mandatory stay of litigation under 9 U.S.C. § 3. To the extent Defendants request a stay pending the scheduled arbitration between HealthFirst and PTI, the Court finds that Defendants have not demonstrated an exceptional circumstance justifying a mandatory stay of the litigation under § 3. Section 3 requires a district court to stay a lawsuit when one party demonstrates that any issue involved in the lawsuit is “referable to arbitration under an agreement in writing for such arbitration.” 9 U.S.C. § 3; Tittle v. Enron Corp.,

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916 F. Supp. 2d 719, 2013 WL 56136, 2013 U.S. Dist. LEXIS 1126, Counsel Stack Legal Research, https://law.counselstack.com/opinion/east-texas-medical-center-regional-healthcare-system-v-slack-txed-2013.