Fredericksburg Care Co. v. Perez
461 S.W.3d 513
| Tex. | 2015Background
- Fredericksburg Care Company (a Texas nursing home) sought to compel arbitration under an admission agreement signed by patient Elisa Zapata; the arbitration clause did not comply with Tex. Civ. Prac. & Rem. Code § 74.451’s required bold, 10‑point warning and attorney‑signature notice.
- Zapata’s beneficiaries sued for health‑care liability (wrongful death/negligence); Fredericksburg moved to compel arbitration, asserting the Federal Arbitration Act (FAA) preempts § 74.451 because the FAA applies to contracts affecting interstate commerce (Fredericksburg received Medicare payments).
- Beneficiaries argued the McCarran‑Ferguson Act (MFA) exempts § 74.451 from FAA preemption because § 74.451 is part of Texas’s Medical Liability Act (Chapter 74), enacted to regulate the business of insurance.
- Trial court denied the motion to compel arbitration; the court of appeals affirmed, concluding Chapter 74 (and § 74.451) were enacted to regulate insurance and thus fell within the MFA exemption.
- The Texas Supreme Court granted review and held the MFA does not apply to § 74.451; FAA preempts § 74.451 and the trial court should have compelled arbitration.
Issues
| Issue | Plaintiff's Argument (Beneficiaries) | Defendant's Argument (Fredericksburg) | Held |
|---|---|---|---|
| Whether the FAA preempts Tex. Civ. Prac. & Rem. Code § 74.451 | FAA would preempt absent MFA; but MFA applies so FAA does not invalidate § 74.451 | FAA applies (interstate commerce via Medicare) and preempts § 74.451 unless MFA exempts it | FAA preempts § 74.451 unless MFA applies; court assumed FAA applies and reached MFA question; ultimately FAA preempts because MFA does not apply |
| Whether the MFA’s first‑clause exemption covers § 74.451 | § 74.451 is part of Chapter 74 enacted to regulate the business of insurance and thus is MFA‑protected | § 74.451 regulates patient‑provider arbitration agreements, not the business of insurance; MFA should not apply | MFA does not apply to § 74.451; statute targets patient‑provider relationship, not insurer‑policyholder relationship |
| Whether courts should analyze the specific provision or the whole statute for MFA purpose inquiry | Beneficiaries/court of appeals: consider Chapter 74 as a whole to find insurance‑regulatory purpose | Fredericksburg: follow Fabe and analyze the specific provision (§ 74.451) in context | Texas Supreme Court: examine the provision in its statutory context (consider Chapter 74) but determine purpose from the whole act and specific provision; here neither shows purpose of regulating insurance |
| Whether § 74.451 is sufficiently tied to the "business of insurance" (Pireno factors) | § 74.451 indirectly affects insurers and insurance costs (goal of TMLA) and thus relates to insurance business | § 74.451 does not transfer risk, govern insurer‑insured relations, or regulate insurance performance; only tangentially linked to insurance costs | § 74.451 fails the inquiry; it regulates patient‑provider arbitration agreements and does not regulate insurer‑policyholder relations — MFA inapplicable |
Key Cases Cited
- U.S. Dep’t of Treasury v. Fabe, 508 U.S. 491 (1993) (governs MFA first‑clause analysis and advises parsing statutory provisions to identify which parts regulate insurance)
- Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681 (1996) (FAA preempts state rules imposing additional formalities on arbitration clauses)
- Allied‑Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) (FAA extends to contracts affecting interstate commerce)
- SEC v. Nat’l Sec., Inc., 393 U.S. 453 (1969) (defines "business of insurance" as laws regulating insurer‑insured relationship and policy performance)
- Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205 (1979) (rejects expansive MFA protection for laws whose effects on insurance are indirect)
- Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982) (identifies factors relevant to defining the "business of insurance")