Specialty Healthcare Management, Inc. v. St. Mary Parish Hospital

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 99-30977

SPECIALTY HEALTHCARE MANAGEMENT, INC.,

Plaintiff-Appellee,

versus

ST. MARY PARISH HOSPITAL, ETC., ET AL.,

Defendants,

ST. MARY PARISH HOSPITAL, ETC.,

Defendant-Appellant.

Appeal from the United States District Court

For the Western District of Louisiana

July 31, 2000

Before REYNALDO G. GARZA, JOLLY, and HIGGINBOTHAM, Circuit Judges.

HIGGINBOTHAM, Circuit Judge:

This diversity case arises out of an effort to enforce an

arbitral award by a federal order directed at a Parish hospital in

Louisiana. Franklin Foundation Hospital appeals the district

court’s grant of a writ of execution and an award of attorney fees

in favor of Specialty Healthcare Management, Inc. because the

Louisiana Constitution provides that “no public property or public

funds shall be subject to seizure.” We find that Louisiana law

here controls; that neither the hospital’s consent to binding

arbitration nor its contention in resisting a preliminary

injunction that Specialty’s injuries were not irreparable waived

its protections under the Louisiana Constitution. We VACATE the

grant of a writ of execution and the award of attorney fees.

I

In August 1993, St. Mary Parish Hospital Service District No.

1, d/b/a Franklin Foundation Hospital (“the hospital”), agreed with

NME Management Services, Inc. (“NMMS”) that NMMS would manage,

staff, and operate an inpatient rehabilitation treatment program at

the hospital, a small thirty-five bed facility. Approximately a

year later, the hospital agreed to NMMS’s assignment of its

management contract to Specialty Healthcare Management, Inc.

(“Specialty”). Specialty assumed all of NMMS’s obligations under

the agreement.

The relationship did not fare well. The hospital gave

Specialty notice in November 1996 that Specialty had not complied

with their agreement. Two months later the hospital terminated the

agreement.

Specialty sued the hospital in the United States District

Court, alleging diversity jurisdiction. It sought monetary

damages, as well as declaratory and injunctive relief. The

hospital demanded arbitration, which was mandatory under the

agreement. The hospital also successfully resisted a preliminary

injunction, urging that an injunction was inappropriate in part

because monetary damages were calculable and thus Specialty would

suffer no irreparable injury, a matter we will return to.

2

Specialty dismissed the suit, and the parties arbitrated in

accordance with the laws of Louisiana.

Specialty received an arbitration award of nearly $750,000

plus interest and sought confirmation of the award in the district

court, pursuant to 9 U.S.C. § 9.1 The court confirmed the award in

a judgment, requiring the hospital to pay the award within 30 days.

When the hospital refused to pay, Specialty sought a writ of

execution under Rule 69(a).2 The hospital argued that Louisiana’s

antiseizure provision controls. The district court granted

Specialty’s request for a writ of execution and attorney fees, and

this appeal ensued.

1

Section 9 provides, in part, that:

If the parties in their agreement have agreed that a judgment of the

court shall be entered upon the award made pursuant to the

arbitration, and shall specify the court, then at any time within

one year after the award is made any party to the arbitration may

apply to the court so specified for an order confirming the award

. . . . If no court is specified in the agreement of the parties,

then such application may be made to the United States court in and

for the district within which such award was made.

We note that the parties’ agreement to arbitrate did not include an explicit

agreement that a judgment could be entered upon an award. In the past, some

courts have held that this is fatal to a court’s jurisdiction to confirm the

award. See Lehigh Structural Steel Co. v. Rust Engineering Co., 59 F.2d 1038,

1039 (D.C. Cir. 1932).

More recently, however, this circuit has held that when the parties agree

to final and binding arbitration, invoke the district court’s jurisdiction before

arbitration, and then seek to confirm the award without objection by either

party, the parties’ implied consent to confirmation permits the district court’s

continued exercise of jurisdiction. See T & R Enterprises, Inc. v. Continental

Grain Co., 613 F.2d 1272, 1279 (5th Cir. 1980).

The only arguable difference in the present case is that the parties’

agreement did not specifically agree to “final and binding” arbitration, but

instead stated that any dispute would be “determined and settled by arbitration.”

However, the hospital has never disputed Specialty’s assertion that the parties

agreed to binding arbitration. The hospital has only urged that such consent did

not waive reliance on state antiseizure provisions during execution. Thus, we

read “determined and settled” to mean “final and binding” – at least for the

purpose of applying T & R Enterprises.

2

FED. R. CIV. P. 69(a).

3

II

Federal Rule of Civil Procedure 69(a) provides that the

[p]rocess to enforce a judgment for the payment of money

shall be a writ of execution, unless the court directs

otherwise. The procedure on execution, in proceedings

supplementary and in aid of a judgment, and in

proceedings on and in aid of execution shall be in

accordance with the practice and procedure of the state

in which the district court is held, . . ., except that

any statute of the United States governs to the extent

that it is applicable.

Article 12, § 10 of the Louisiana Constitution permits suits

against the State and its political subdivisions, but subsection

(C) states that “no public property or public funds shall be

subject to seizure.” The hospital is a hospital service district

that was created by the St. Mary Parish Policy Jury. Thus, under

state law, the hospital is a political subdivision of Louisiana

whose assets are exempt from seizure.3

Under Rule 69(a), state procedure on execution would govern

unless a federal statute otherwise applied.4 The arbitral award

was confirmed under 9 U.S.C. § 9 of the Federal Arbitration Act.5

Neither § 9 nor any other portion of the FAA provides any

additional procedures for enforcing confirmed awards. Instead, §

13 of the FAA specifically provides that a confirmed arbitral award

“may be enforced as if it had been rendered in an action in the

3

See LA. REV. STAT. ANN. § 46:1072(2)(a) (West Supp. 1996); see also id. §

46:1051 et. seq. According to the hospital, it only has to pay the judgment

if it chooses to appropriate funds for that purpose. See LA. REV. STAT. ANN. §

13:5109 (B)(2) (West 1991).

4

See generally 13 JAMES WM. MOORE ET AL., MOORE’S FEDERAL PRACTICE ¶ 69.03[2] (3d

ed. 1999).

5

Since the FAA does not create federal jurisdiction, confirmation under §

9 requires an independent basis for federal jurisdiction, such as diversity

jurisdiction in the present case. See Moses H. Cone Memorial Hosp. v. Mercury

Constr. Corp., 103 S. Ct. 927, 942 n.32 (1983).

4

court in which it is entered.” Thus, for awards confirmed in

federal court, Rule 69(a) and its incorporation of state procedure

remains the governing rule, at least on the surface.

Nevertheless, federal interests sometimes trump the substance

of a state’s antiseizure provision by means other than Rule 69(a).

For example, in civil rights cases, this circuit has held that it

is within the scope of federal power to command state officials to

pay judgments from state funds, such as judgments for attorney fees

under 42 U.S.C. § 1983, despite the existence of state antiseizure

provisions, even though a writ of execution is not issued.6 One

justification for this result is that Congress under its section 5

powers of the Fourteenth Amendment chose to enact legislation to

permit all successful civil rights litigants to recover attorney

fees; thus, there is a federal interest in the monetary remedy.7

The Eastern District of Michigan, in City of Detroit v. City

of Highland Park,8 stated that “it is inconceivable that state and

local entities can thwart federal courts’ ability to enforce

6

See Collins v. Thomas, 649 F.2d 1203 (5th Cir. 1981); Gates v. Collier,

616 F.2d 1268 (5th Cir. 1980); Gary W. v. Louisiana, 622 F.2d 804 (5th Cir.

1980). In these cases, Rule 69(a) was not used; mandamuses issued under Rule 70.

Similarly, in Leroy v. City of Houston, 906 F.2d 1068 (5th Cir. 1990), this

circuit held that federal law allows recovery of attorney fees for violations of

voting rights guarantees. Despite the fact that there was a compelling federal

interest, this court held that Rule 69(a) did not permit execution against the

city of Houston because Texas law prohibited execution “on property belonging to

a city in its governmental or municipal character.” Id. at 1085. Because Texas

law permitted enforcement of a money judgment against a city by mandamus, Rule

70 authorized the district court to order the city to pay the judgment. See id.

at 1085-86.

This circuit has approved asset seizure through a writ of fieri facias to

satisfy a judgment of attorney fees in the civil rights context, despite

Louisiana law prohibiting such seizure. See Bowman v. City of New Orleans, 747

F. Supp. 344 (E.D. La. 1989), aff’d, 914 F.2d 711 (5th Cir. 1990). Regardless of

the rule applied, the cases demonstrate no basis to override state antiseizure

provisions absent a federal interest.

7

See e.g., Gary W. v. Louisiana, 441 F. Supp. 1121, 1125-27 (E.D. La.

1977), aff’d, 622 F.2d 804 (5th Cir. 1980).

8

878 F. Supp. 87 (E.D. Mich. 1995).

5

judgments ‘through the adoption of immunizing procedures and vague

statutory schemes.’”9 In that case, the court upheld the use of a

writ of mandamus ordering Highland Park to pay money to Detroit for

Detroit’s provision of water services mandated by federal law: the

Clean Water Act.10

Assuming a federal court has the power to compel the payment

of money in contravention of state execution provisions so long as

there is a federal interest in the remedy, we must determine

whether such a federal interest exists in the current case.

Specialty argues that this case implicates a federal interest in

arbitration created by the FAA that includes an interest in

successful enforcement. The hospital argues that the FAA was

invoked solely as a procedure to confirm the award and that the FAA

expresses no federal interest in the scope or manner of execution.

Of course, even if the FAA was invoked solely to confirm the

award, this does not mean that the parties agreement to arbitrate

was not controlled by the FAA. The FAA is “applicable to any

arbitration agreement within the coverage of the Act”11 which

includes written agreements to arbitrate if the contract

“evidenc[es] a transaction involving commerce.”12 Assuming that the

parties’ management agreement involved “commerce,” a broadly

9

Id. at 90 (quoting Arnold v. BLaST Intermediate Unit 17, 843 F.2d 122, 128

(3d Cir. 1988)).

10

See City of Detroit, 878 F. Supp. at 90.

11

Moses H. Cone Memorial Hospital, 460 U.S. at 23.

12

9 U.S.C. § 2.

6

construed term under the FAA,13 the parties’ agreement to arbitrate

was governed by the FAA, a creature of federal law.

The FAA, however, does not preempt all state law related to

arbitration agreements. It “contains no express pre-emptive

provision, nor does it reflect a congressional intent to occupy the

entire field of arbitration.”14 Thus, the question is simply

whether Louisiana’s antiseizure provision “would undermine the

goals and policies of the FAA.”15

The FAA’s primary goal is to place agreements to arbitrate “on

the same footing as other contracts.”16 As such, the FAA “requires

courts to enforce privately negotiated agreements to arbitrate,

like other contracts, in accordance with their terms.”17 Moreover,

“[a]rbitration under the [FAA] is a matter of consent, not

coercion, and parties are generally free to structure their

arbitration agreements as they see fit.”18 Based on these

principles, an agreement to arbitrate under the laws of a

13

See Del E. Webb Constr. v. Richardson Hosp. Authority, 823 F.2d 145, 147

(5th Cir. 1987). Neither party has contended that their agreement did not relate

to interstate commerce, and we have no reason to say it did not: the agreement

involved the staffing and management of a Louisiana hospital by an out-of-state

corporation.

14

See Volt Information Sciences, Inc. v. Board of Trustees of Leland

Stanford Junior University, 489 U.S. 468, 477 (1989).

15

Id. at 478.

16

Id. (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 511 (1974)

(quoting H.R. REP. NO. 96, 68th Cong., 1st Sess., 1, 2 (1924))) (internal

quotation marks omitted).

17

Id.

18

Id. at 479.

7

particular state will be enforced as written, even if that state’s

arbitration laws differ from federal arbitration law.19

In this case, the parties’ agreement included a Louisiana

choice of law provision and an arbitration clause that required

binding arbitration under the laws of Louisiana. Specialty

contends that such an agreement waived reliance on state

antiseizure provisions. The hospital responds that while it agreed

to binding arbitration, such an agreement only meant that liability

and damage findings would be binding, not that Specialty could

enforce the award through any means of execution.

Under Louisiana law, arbitration is defined as “bind[ing] [the

parties] reciprocally to perform what shall be arbitrated.”20 At

19

See id. The FAA would preempt the application of state laws that

frustrate its primary purpose of enforcing agreements to arbitrate according to

their terms, such as laws making such agreements unenforceable. See id. at 471.

Of course, state antiseizure laws limit the enforceability of the resulting

judgment, but that is a separate question from the enforceability of the original

agreement to arbitrate. As noted, § 13 of the FAA specifically envisions that

a confirmed arbitral award will have no greater power in its enforcement than a

judgment in a comparable action.

After Volt Informational Sciences was decided, this circuit held that a

federal court is also not bound by the parties’ choice of law in other limited

circumstances not at issue here. See Atlantic Aviation, Inc. v. EBM Group, Inc.,

11 F.3d 1276, 1279 (5th Cir. 1994) (holding that parties’ choice of law cannot

determine scope of judicial review); see also Ford v. NYLCare Health Plans of

Gulf Coast, Inc., 141 F.3d 243, 248 n.6 (5th Cir. 1998) (discussing implied

limitation on Atlantic Aviation in view of Volt Information Sciences).

Regardless of the power of a federal court to ignore the parties’ choice

of law clause and apply federal law in its place, we have no occasion to do so

here. The parties stand by their choice of Louisiana law, and we find no

conflicting federal interests.

20

LA. CIV. CODE ANN. art. 3099. Specialty cites no cases applying or

interpreting this general definition. Specialty also cites article 3129, which

states that the “formality [of judicial confirmation] is only intended to invest

the award with a sufficient authority to ensure its execution.” The most

reasonable interpretation of this language, however, is simply that judicial

confirmation allows execution upon an arbitral award in conformity with state law

like any other judgment, not that it imbues arbitral awards with greater powers

than other judgments.

Specialty also cites Lander Co., Inc. v. MMP Investments, Inc., 107 F.3d

476 (7th Cir. 1997), in which the issue was whether a plaintiff’s failure to

explicitly allege jurisdiction under the FAA forfeited its right to confirm an

arbitral award in federal court. See id. at 477-79. The court found that the

defendant’s consent to binding arbitration waived any argument regarding the

plaintiff’s failure to explicitly invoke the FAA when requesting judicial

8

best, this definition might be interpreted to require a party who

consents to binding arbitration to perform an arbitral award of

specific performance. However, we do not read this general

definition to invalidate Louisiana’s specific antiseizure

provisions in all agreements to arbitrate.21 There is no evidence

suggesting that Louisiana intended arbitration agreements to

automatically strip political subdivisions of the background

protections they would otherwise enjoy.

Because we find that Louisiana’s antiseizure provisions

remained part of the law under which the parties agreed to

confirmation. See id. at 480.

Here, however, it is undisputed that Specialty invoked the FAA and federal

court diversity jurisdiction to confirm its arbitral award. More importantly,

we do not read Lander to stand for the broader proposition that consent to

binding arbitration also waives reliance on state antiseizure protections where,

as here, those protections were already part of the law which the parties chose

to govern their agreement. In other words, consent to binding arbitration may

properly imply consent to confirmation, yet not imply consent to execution beyond

the scope of the chosen law.

21

As additional support for its position, Specialty cites Mastrobuono v.

Shearson Lehman Hutton Inc., 115 S. Ct. 1212 (1995), in which the Supreme Court

affirmed an arbitral award of punitive damages despite the fact that state case

law did not allow an arbitrator to award punitive damages. In Mastrobuono, the

agreement between the parties was ambiguous as to whether the parties had chosen

to be governed by state decisional law; it was also ambiguous as to whether the

parties had agreed to allow arbitration under other rules which would have

allowed awards of punitive damages. See id. at 1216-19. Construing these

ambiguities against the drafter, the Supreme Court affirmed the award. See id.

at 1219.

Mastrobuono is inapplicable to the present case. Here, it is undisputed

that the damage award was within the scope of the arbitrator’s power. What it

at issue is whether the hospital, by agreeing to binding arbitration, waived the

protection of Louisiana’s antiseizure provisions with respect to execution. Even

if Mastrobuono were somehow applicable, these state protections were part of

Louisiana statutory law by which the parties clearly agreed to be bound. And, as

noted, we did not read Louisiana’s general definition of arbitration to imply

that the hospital waived state protections by consenting to arbitration.

It might be argued that it is pointless to agree to binding arbitration if

the result would be a nonenforceable award. While that may sometimes be true,

the fact that arbitration is less expensive than court litigation may be reason

enough for two parties to agree to arbitration in the event of a dispute, even

if one party has a means of avoiding execution on any resulting judgment. If

that result seems unfair in the present case, it is not because the parties

agreed to arbitration, but rather because the law the parties chose to govern

their dispute was inherently one-sided when providing protections against certain

forms of judgment satisfaction.

9

arbitrate, we see that the primary policy of the FAA is furthered

rather than frustrated when those provisions are applied to the

execution of a confirmed arbitral award. This conclusion is

buttressed by the fact that under § 13, a judgment resulting from

a confirmed arbitral award

shall have the same force and effect, in all respects,

as, and be subject to all provisions of law relating to,

a judgment in an action.22

Thus, unless the parties have otherwise agreed, the FAA expresses

no separate interest in making confirmed arbitral award more

powerful than comparable court judgments. Had the current state

contract dispute been litigated in federal court under diversity

jurisdiction, the resulting judgment would have been enforceable

according to Rule 69(a), which incorporates state exemptions unless

federal law otherwise applied.23 To allow the confirmed arbitral

award to be enforced with greater power would contradict § 13.

In sum, the FAA encourages the enforcement of agreements to

arbitrate according to their terms and expresses no additional

federal interest in either the particular method or scope of

execution of arbitral awards. We therefore find no inherent

conflict between the FAA and state antiseizure provisions when the

parties have agreed to arbitrate according to state law and their

agreement does not waive reliance on state protections. While the

FAA clearly encourages the creation of binding liability

determinations, the manner of execution once liability has been

determined is a concern the FAA simply does not touch. Thus, while

the parties’ agreement to arbitrate was in an important sense

22

9 U.S.C. § 13 (emphasis added).

23

See, e.g., First Nat’l Bank of Boston v. Santisteban, 285 F.2d 855 (1st

Cir. 1961); United States v. Miller, 229 F.2d 839 (3d Cir. 1956).

10

controlled by federal law, there was nevertheless no conflict

between federal and state law justifying a writ of execution or an

order commanding hospital officials to pay the judgment.24

III

Specialty alternatively argues that the hospital’s prior

conduct constitutes a waiver of resort to Louisiana’s antiseizure

provision. Under Louisiana law, “conduct so inconsistent with the

intent to enforce [a] right as to induce a reasonable belief that

[the right] has been relinquished” constitutes a waiver.25

According to Specialty, the hospital resisted a preliminary

injunction by insinuating that monetary damages would be available

to Specialty if Specialty prevailed at arbitration.26 Thus, the

hospital waived any reliance on the antiseizure provision. The

hospital responds by stating that it never said that damages would

be “collectable” but only that they were “calculable” and therefore

not irreparable.

Specially initially requested preliminary injunctive relief

that would have enjoined the hospital from terminating the

agreement or employing Specialty’s current and former employees.

The hospital argued that such relief was inappropriate in part

24

See FED. R. CIV. P. 70.

25

Steptore v. Masco Constr. Co., 643 So.2d 1213, 1216 (La. 1994).

26

Specialty stated below that its request for preliminary relief had been

denied, and the hospital has not stated otherwise. The record, however, does not

affirmatively indicate that Specialty’s request was ruled upon before the case

was sent to arbitration. A hearing was scheduled on the matter, but that hearing

was canceled because Specialty dismissed the case and proceeded with arbitration.

Even if the district court never ruled upon Specialty’s request for injunctive

relief, that would not prevent us from deciding the hospital’s arguments before

the court waived reliance on Louisiana’s antiseizure provision.

11

because Specialty’s damages were not irreparable since this was a

contract dispute with easily quantifiable damages.

However, the hospital’s argument regarding the quantifiable

nature of Specialty’s contract damages was only a small part of the

hospital’s opposition to Specialty’s request for preliminary

relief. The hospital’s primary contention was that injunctive

relief was inappropriate pending mandatory arbitration except in

limited circumstances to preserve the status quo. According to the

hospital, the status quo was already being preserved because the

hospital had retained Specialty’s former employees to staff the

rehabilitation unit. The only difference was that the staff was

paid by the hospital rather than Specialty.

The hospital also argued that Specialty would be unable to

prevail on the merits, which counseled against the imposition of an

injunction. The hospital contended that it was within its rights

to terminate the management agreement because Specialty breached

the agreement in numerous ways. Additionally, the hospital argued

that the staff hiring prohibition, which prevented the hospital

from hiring certain employees or former employees of Specialty, was

unenforceable under Louisiana law.

Even when the hospital argued that Specialty would suffer no

irreparable injuries, Specialty’s argument that contract damages

were easily quantifiable was only one part of the argument. In

addition to damages under the contract, Specialty alleged several

other injuries, including loss of reputation and goodwill and the

disclosure of trade secrets. The hospital countered that

irreparable injury in the form of loss of goodwill or reputation

was impossible because no patients even knew that the hospital

12

staff had worked for Specialty rather than the hospital, since

patients were billed through the hospital.

With regard to the disclosure of trade secrets, the hospital

claimed that the requested injunction would not prevent such

disclosure because even if the hospital were prohibited from

employing Specialty’s former employees, those employees would not

be enjoined from leaking Specialty’s trade secrets in other

contexts.

Finally, the hospital argued that the equities did not merit

the imposition of an injunction since this was not a case where

staff members quit working for Specialty only to hire on with the

hospital, but instead it was a case where Specialty fired its staff

after it breached the management agreement and failed to relocate

them, leaving them stranded and unemployed. As such, Specialty had

only itself to blame for the fact that the hospital rehired them.

Moreover, issuing an injunction would actually cause irreparable

injury to the community, since it would result in continued

inadequate staffing by Specialty, and such injury to the community

outweighed any benefit Specialty would receive from the issuance of

an injunction.

We recount these arguments not to express any view on their

merits, but to highlight the fact that the hospital’s argument

regarding Specialty’s contract damages was a minor part of the

hospital’s overall opposition to Specialty’s motion. Of course,

one might argue that the hospital’s precise use of the terms

“calculable” and “quantifiable” demonstrates that the hospital

intended to imply that Specialty’s injuries were not irreparable

because monetary damages would be available to make Specialty whole

in the event that Specialty prevailed at arbitration. If that is

13

was what the hospital clearly implied, it might be a basis for

waiver or estoppel. The hospital’s precise language, however, is

equally consistent with the theory that the hospital was arguing

within but not beyond the boundaries of the relevant law.

There is some authority, however, for the proposition that an

inability to actually collect on a money judgment may suffice to

make an injury irreparable.27 Thus, it may have been insufficient

for the hospital to argue that Specialty’s damages were calculable

in order to show they were not irreparable. That the hospital may

have made an ultimately losing argument, however, does not entail

that it intentionally misrepresented the standard for irreparable

injury; it is equally conceivable that the hospital was unaware of

such contrary authority.

In sum, while we are sympathetic to Specialty’s position, we

cannot find that the hospital’s circumscribed arguments constitute

conduct that is “so inconsistent with the intent to enforce [a]

right as to induce a reasonable belief that [the right] has been

relinquished.”28 For all of these reasons, we VACATE the district

court’s order issuing a writ of execution.

IV

This circuit applies state law in determining whether attorney

fees should be awarded in state-based claims.29 Under Louisiana

law, fee awards are allowed only when authorized by contract or

27

See Alvenus Shipping Co. v. Delta Petroleum (USA) Ltd., 876 F. Supp. 482,

487 (S.D.N.Y. 1994).

28

Steptore, 643 So.2d at 1216.

29

See U.S. ex rel. Varco Pruden Bldgs. v. Reid & Gary Strickland Co., 161

F.3d 915 (5th Cir. 1998).

14

statute.30 It is undisputed that there is no Louisiana statutory

basis for the fee award in this case.

Nevertheless, federal courts have the power to award attorney

fees for vexatious behavior including the refusal to abide by an

arbitral award without justification,31 which is the precise reason

that the district court awarded attorney fees to Specialty. Because

the hospital’s arguments against issuing a writ of execution were

supported by legal justification, the award of attorney fees must

also be VACATED as an abuse of discretion.32

WRIT VACATED; FEE AWARD VACATED.

ENDRECORD

30

Steptore, 643 So.2d at 1218.

31

See International Ass’n of Machinists & Aerospace Workers v. Texas Steel

Co., 639 F.2d 279, 283 (5th Cir. 1981); see also Chambers v. NASCO, Inc., 501

U.S. 32, 45-46 (1991).

32

See Chambers, 501 U.S. at 50 (applying abuse of discretion standard when

reviewing fee award based on district court’s inherent power to police itself).

15

REYNALDO G. GARZA, Circuit Judge, dissenting:

I respectfully dissent. Any reasonable person would believe

that an agreement to “binding” arbitration means that any

resulting damages would be enforceable and collectable.

Otherwise, why agree to arbitrate? Moreover, when the other side

argues below that there will be no irreparable injury because

damages will be sufficient, any reasonable person would take this

as indicating that damages will be collectable. For how can it

be that damages which cannot be collected repair any injury?

Because the majority reaches a conclusion contrary to such

reasonable expectations, I dissent.

What the majority forgets to note is that the purpose of

arbitration is to provide participants with a speedy and

effective alternative to the courts, which in turn relieves

courts of some of the burden of their ever increasing caseload.

Today’s decision will provide a disincentive to enter into

arbitration, which will mean that cases such as these must be

tried in state and federal court. I repeat: who will enter into

binding arbitration if it is not truly binding? The Hospital’s

consent to binding arbitration would lead any reasonable party to

believe that any resulting award could be enforced, including,

through the seizure of assets upon the hospital’s refusal to pay.

What is more, the Hospital failed to argue below that state law

prevented any such seizure. Instead the Hospital, quite to the

16

contrary, argued that monetary damages alone would be adequate,

not that an arbitral award could not be enforced. This

reinforced the reasonable assumption the parties were clearly

operating under, namely that the arbitral award could be

enforced. Under these circumstances, I would find that the state

anti-seizure law argument was waived.

This is all particularly troubling where it is the Hospital

that demanded arbitration, perhaps knowing full well that any

agreement would not be enforced. The Hospital makes a mockery of

the arbitration proceedings by, after reaching an arbitral

agreement, raising the state law defense to avoid paying the

agreed-upon amount.

I also find that the Hospital’s conduct was so inconsistent

with the intent to enforce the anti-seizure provisions as to

induce the reasonable belief that the right had been

relinquished. This would be a waiver under Louisiana law. The

majority notes that all the Hospital argued was that any contract

damages would be easily quantifiable, and therefore not

irreparable, not that any such damages would be enforceable or

collectable. I would find, as the majority hints, that an

inability to collect on a money judgment would suffice to make an

injury irreparable. Therefore, when the Hospital argued below

that the injuries in question were not irreparable, any

reasonable party would take this as a statement that any damages

would be collectable.

17

To conclude, I note that a Louisiana lawyer sitting as a

federal judge decided this issue of Louisiana law, and I would

defer to his judgment on this matter.

18