YOU MUST ARBITRATE – EVEN IF THE ISSUE IS PURELY LEGAL

Tennessee courts mandate arbitration if the contract between the parties requires arbitration. In some cases, this mandate seems absurd. For instance, in Thomas v. Pediatrix Medical Group of Tennessee, P.C. E-2009-01836-COA-R3-CV (Tenn. Ct. App. Sept. 14, 2010), the issue was the validity of a non-competition provision in an employment agreement between a physician and his employer. After execution of the employment agreement, the Tennessee Supreme Court issued its decision in Murfreesboro Medical Clinic, P.A. v. Udom, 166 S.W.3d 674 (Tenn. 2005) holding that except as authorized by statute, physician non-competition agreements are void.

Physicians sue in court. The practice says the contract requires arbitration, so the practice demands arbitration. The physicians say arbitration is unnecessary because the issue is purely a legal issue. The court of appeals says, even if the case involves solely “legal” questions, because the contract requires arbitration, the dispute will be settled by arbitration. In fact, the court added “a panel of experienced, certified arbitrators will be able to rely on the well established laws of statutory construction” and properly decide the case.

The problem – what if the “panel of experienced, certified arbitrators” are wrong on the legal issues. Unfortunately, the Tennessee Uniform Arbitration Act and the Federal Arbitration Act allow only limited appeal of an arbitration decision. Judges often err on legal issues – and the court of appeals or supreme court exists to correct those errors.

THE MORAL OF THIS STORY – Do not sign an agreement that contains an arbitration provision unless you agree that legal issues may be decided by a court.