John Hays v. HCA Holdings, Incorporated
838 F.3d 605
| 5th Cir. | 2016Background
- Dr. John T. Hays, a cardiologist with epilepsy, alleges HCA failed to accommodate a limited workload, causing stress-related seizures and wrongful termination.
- Hays signed a Physician Employment Agreement (the Agreement) with Austin Heart and Capital Area Cardiology (CAC) that contained a mandatory, binding arbitration clause.
- Hays sued in state court (TCHRA, negligence, breach of contract, tortious interference) and denied the Agreement’s validity; Austin Heart and CAC compelled arbitration and the case was dismissed as to them.
- Hays subsequently sued HCA Holdings and HCA Physician Services (non-signatories). HCA removed to federal court and moved to compel arbitration based on equitable estoppel.
- The district court compelled arbitration for all claims: applied direct benefits estoppel to the tortious-interference claim and applied intertwined-claims estoppel to the TCHRA, negligence, and breach claims.
- The Fifth Circuit affirmed, holding direct benefits estoppel appropriate for the tortious-interference claim and, as an Erie guess, that Texas would adopt intertwined-claims estoppel for the remaining claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a non-signatory (HCA) can compel arbitration of tortious-interference claim | Hays: tortious-interference claim is independent and should not be governed by Agreement | HCA: claim depends on the Agreement and thus arbitration is enforceable via direct benefits estoppel | Court: Direct benefits estoppel applies; arbitration compelled |
| Whether Texas recognizes intertwined-claims estoppel so non-signatory can compel arbitration of statutory/tort/contract claims | Hays: Texas hasn’t adopted intertwined-claims estoppel; it’s inapplicable here | HCA: Merrill Lynch suggests validity; lower Texas courts have applied it; arbitration favored | Court: Erie guess — Texas Supreme Court would adopt intertwined-claims estoppel; applied here; arbitration compelled |
| Whether Hays’ pleadings constitute strategic/artful pleading to avoid arbitration | Hays: pled in the alternative and differentiated defendants | HCA: Hays treated entities as a single unit and used nearly identical allegations in arbitration and litigation | Court: Hays’ pleadings amounted to strategic/artful pleading; close relationship/tight relatedness supports estoppel |
| Whether arbitrability of the Agreement’s validity must be decided by court or arbitrator | Hays: attacks overall validity of Agreement, so court should decide | HCA: arbitrability questions governed by arbitration agreement; non-signatory can enforce by estoppel | Court: Validity/threshold arbitrability issues are for the arbitrator; dismissal/compel affirmed |
Key Cases Cited
- G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) (Texas recognizes non-signatory enforcement of arbitration agreements under equitable estoppel)
- In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 186 (Tex. 2007) (discusses limits on estoppel doctrines and contrasts intertwined-claims with concerted-misconduct estoppel)
- JLM Indus., Inc. v. Stolt-Nielsen, SA, 387 F.3d 163 (2d Cir. 2004) (articulates the “close relationship”/intertwined-claims test)
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (explains direct benefits estoppel when claim cannot stand independently of contract)
- In re Morgan Stanley & Co., 293 S.W.3d 182 (Tex. 2009) (distinguishes claims arising from general law from those dependent on contract)
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favors arbitration; doubts resolved in favor of arbitration)