Flexon v. PHC-Jasper, Inc.

• Decision Date: 29 July 2015
• Docket Number: No. 5336.,Appellate Case No. 2013–002498.,5336.
• Citation: 776 S.E.2d 397,413 S.C. 561
• Court: South Carolina Court of Appeals
• Parties: Phillip FLEXON, M.D., Respondent, v. PHC–JASPER, INC., d/b/a Coastal Carolina Medical Center, Coastal Carolina Medical Center, Inc., Lifepoint Hospitals, Inc., and Tenet Health systems, Inc., Of Which Lifepoint Hospitals, Inc., is the Appellant.

413 S.C. 561

776 S.E.2d 397

Phillip FLEXON, M.D., Respondent

v. PHC–JASPER, INC., d/b/a Coastal Carolina Medical Center, Coastal Carolina Medical Center, Inc., Lifepoint Hospitals, Inc., and Tenet Health systems, Inc.Of Which Lifepoint Hospitals, Inc., is the Appellant.

Appellate Case No. 2013–002498.

No. 5336.

Court of Appeals of South Carolina.

Heard June 10, 2015.

Decided July 29, 2015.

Rehearing Denied Sept. 16, 2015.

Trudy Hartzog Robertson and Joseph Timothy Belton, both of Moore & Van Allen, PLLC, of Charleston, for Appellant.

William B. Harvey, III, of Harvey & Battey, PA, of Beaufort, for Respondent.

Opinion

GEATHERS, J.

In this breach of contract action, Appellant Lifepoint Hospitals, Inc. (Lifepoint) seeks review of the circuit court's denial of its motion to compel arbitration. Lifepoint argues the circuit court incorrectly applied the law-of-the-case doctrine to the motion to compel. Lifepoint also argues the circuit court incorrectly applied the “commerce in fact” test to determine whether the physician services performed by Respondent Phillip Flexon, M.D. affected interstate commerce and, thus, triggered the Federal Arbitration Act (FAA). We affirm.

FACTS/PROCEDURAL HISTORY

In the fall of 2006, Lifepoint and Flexon negotiated for Flexon's employment with PHC–Jasper, Inc., d/b/a Coastal Carolina Medical Center (PHC), in Hardeeville, South Carolina. Lifepoint owned Province Healthcare Company, which owned PHC. At the time, Flexon had a medical practice in Savannah, Georgia and was on the staff of Memorial University Medical Center (Memorial) in Savannah. However, Flexon was living in Hardeeville and desired to practice medicine there. Therefore, on December 18, 2006, Flexon and PHC executed a contract for Flexon to begin employment with PHC on March 15, 2007, for a five-year term (Agreement). Flexon's medical practice was to be located at 1010 Medical Center Drive in Hardeeville and “such other practice sites in Beaufort and Jasper Counties ... reasonably designated by [PHC] from time to time.” The Agreement prohibited any “transfer, assignment or other modification affecting the terms or conditions of the [Agreement]” unless “extenuating circumstances [were] shown to exist.”

The Agreement contained the following provisions regarding litigation and arbitration:

13.4 Governing Law and Venue. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of South Carolina.Any action or claim arising from, under or pursuant to this Agreement shall be brought in the courts, state or federal, within the State of South Carolina, and the parties expressly waive the right to bring any legal action or claims in any other courts. The parties hereto hereby [sic] consent to venue in any state or federal court within the State of South Carolina having jurisdiction over the County for all purposes in connection with any action or proceeding commenced between the parties hereto in connection with or arising from this Agreement.

13.5 Arbitration.Except as to the provisions contained in Articles VIII and IX [Disclosure of Information and Covenant Not to Compete], the exclusive jurisdiction of which shall rest with a court of competent jurisdiction in the state where the hospital is located[,] any controversy or claim arising out of or related to this Agreement, or any breach thereof, shall be settled by arbitration in the County, in accordance with the rules and procedures of alternative dispute resolution and arbitration ..., and judgment upon any award rendered may be entered in any court having jurisdiction thereof.

(emphases added).

After Flexon began employment with PHC, he remained on the staff at Memorial and continued to see patients coming from Georgia. On or about June 30, 2007, Province Healthcare Company, Lifepoint's wholly owned subsidiary, sold PHC to Tenet Healthsystems, Inc. (Tenet). Tenet then presented Flexon with an “Amendment to and Assignment of Physician Employment Agreement” purporting to assign the Agreement to Tenet. Flexon refused to execute this document.¹

On or about August 17, 2007, PHC changed its name to Coastal Carolina Medical Center, Inc. (Coastal). Approximately one year later, Flexon sent a formal notice of termination for cause to Coastal (formerly PHC). In May 2009, Coastal sent Flexon a letter demanding over $725,000 for amounts Coastal claimed it was owed pursuant to various provisions of the Agreement. Coastal also demanded that Flexon immediately cease working for Memorial.

On May 26, 2009, Flexon filed this breach of contract action against Coastal (a twice-removed subsidiary of Lifepoint), Lifepoint, and Tenet, alleging that prior to entering into the Agreement, Lifepoint failed to disclose it was in negotiations with Tenet for Tenet's purchase of PHC's (now Coastal's) assets. The Complaint stated Flexon's performance of the Agreement required him to close his practice in Savannah, “where he had privileges at surgical hospitals.” The Complaint also alleged that during the negotiation of the Agreement, Lifepoint represented that PHC would purchase certain equipment needed by Flexon in the operating room and would recruit and hire an audiologist to be part of Flexon's practice but PHC later refused to honor these representations.

On October 23, 2009, Coastal filed a motion to compel arbitration, asserting the Agreement contained a valid and enforceable arbitration provision. During the motions hearing, Coastal stipulated that the arbitration provision in the Agreement violated the notice requirements of the South Carolina Arbitration Act but argued the FAA applied to the arbitration provision and, thus, required arbitration of the parties' claims. To support its argument that the Agreement evidenced a transaction involving interstate commerce, triggering the FAA,² Coastal referenced the Complaint's allegations that (1) Flexon had to “discontinue, close, and leave an established practice in Savannah, Georgia, where he had privileges at surgical hospitals” in order to sign the Agreement and (2) Lifepoint knew that Flexon “would have to close and terminate an established practice in Savannah in order to fulfill his obligations under the [Agreement].”

Additionally, Coastal referred to three of Flexon's interrogatory responses:

[I]n an answer to an interrogatory that we filed, he said that many Savannah doctors stopped referring patients to Dr. Flexon after a [stock] purchase agreement occurred between our clients. I think the implication here is that he was getting business across state lines, and was relying on that business in order to have a successful practice.

On Interrogatory Four, which was a particularized statement of damages, he mentions that he lost six weeks of his salary while he had to move his practice from Savannah to Coastal, and then move it back again once he quit.

Interrogatory Nine, which was about availability of equipment in the E.R., which is one of the complaints Dr. Flexon had against my client. He said that availability of equipment became so unreliable, [Flexon

] began taking his complicated cases to Memorial.... So, while he was working for our client, he was sending his complicated cases and performing those surgeries that were being billed by our hospital, performing that surgery in Savannah.

Subsequently, Lifepoint's counsel briefly spoke in support of Coastal's motion to compel:

[COUNSEL]: Judge, if I may; I'm not presenting argument. This is not our motion today, but we pled this as an affirmative defense as well, that this matter should be submitted to arbitration. I think it goes to arbitration and it should. We support this motion. It goes as to all parties. If I have to separately move, I can do that, but—

whereupon counsel was cut off by the presiding judge (the first circuit court judge). The following colloquy then transpired:

THE COURT: I think you ought to do that, because obviously [Flexon] isn't on notice of that. I understand that's your position, but all I can deal with is this motion today. But I understand that. I think you need to file your own motion. And I realize you pled it.

[COUNSEL]: Yes, sir.

THE COURT: But he wasn't prepared to argue, except as against this motion today. It might be an identical argument, but—

[COUNSEL]: I think that likely it is. So I will make it.

On June 17, 2010, Lifepoint filed its own motion to compel arbitration. Subsequently, the first circuit court judge issued an order denying Coastal's motion. The first circuit court judge based his decision on two grounds: “There is no language in the [Agreement that] mentions, conditions, requires, affects or involves interstate commerce.... Further, ... the parties to [the Agreement] specifically agreed to litigate any dispute arising from, under or pursuant to [the Agreement] in the courts of South Carolina.”³ Coastal appealed the first circuit court judge's order to this court, which affirmed the order. Flexon v. PHC–Jasper, Inc., 399 S.C. 83, 731 S.E.2d 1 (Ct.App.2012) (Flexon I ). This court concluded the Agreement and surrounding facts did not implicate interstate commerce and, therefore, the FAA did not apply to the Agreement. 399 S.C. at 89, 731 S.E.2d at 4. After the case was remitted, Lifepoint withdrew its motion to compel arbitration without prejudice and took Flexon's deposition.

During his deposition, Flexon admitted his performance under the Agreement involved providing medical services in both South Carolina and Georgia. When asked about problems resulting from trying to transport a practice from Georgia to South Carolina, Flexon stated, “[T]he practice wasn't transported. The practice always existed in both states before and after. It really did. I mean, it was—you know, it—by—by accident there's a river and a state line, but the practice always involved both states.” Flexon also stated that he had “plenty of patients coming from Georgia.” Moreover, Flexon indicated that Lifepoint's CEO, Eric Deaton, insisted Flexon remain on...