Isles Wellness, Inc. v. PROGRESSIVE NORTHERN

Decision Date15 September 2005
Docket Number No. A04-488, No. A04-489., No. A04-486, No. A04-487, No. A04-485
PartiesISLES WELLNESS, INC., n/k/a Minneapolis Wellness, Inc., et al., Respondents, v. PROGRESSIVE NORTHERN INSURANCE CO., a Delaware corporation doing business in the State of Minnesota, Appellant, Allstate Indemnity Company, a Delaware corporation doing business in the State of Minnesota, Appellant.
CourtMinnesota Supreme Court

Richard S. Stempel, Eric S. Hayes, Christopher M. Drake, Stempel & Associates, PLC, Hopkins, MN, for Appellants.

Michael John Weber, Weber Law Office, Minneapolis, MN, for Respondents.

Kay Nord Hunt, Diane M. Odeen, Lommen, Nelson, Cole & Stageberg, P.A., Minneapolis, MN, for Amicus Curiae Insurance Federation of MN.

David C. Wulff, Roseville, MN, for Amicus Curiae MN Chiropractic Association.

Heard, considered, and decided by the court en banc.

OPINION

BLATZ, Chief Justice.

The issue in this case is whether the lay ownership of respondents—three clinics1 providing chiropractic, physical therapy, and massage therapy services (collectively "clinics")—violated the corporate practice of medicine doctrine by providing health care services to patients. The court of appeals held that the corporate employment of chiropractic, physical therapy, and massage therapy practitioners is not prohibited. We affirm in part, and reverse and remand in part, holding that the corporate practice of medicine doctrine applies to the practice of chiropractic, but does not apply to physical therapy or massage therapy.

Jeanette Couf is the sole shareholder of the three clinics at issue in this appeal. The clinics are organized as general business corporations under the Minnesota Business Corporation Act. Minn.Stat. ch. 302A (2004). Couf is not licensed as a chiropractor, physical therapist, or massage therapist.

In March and May 2003, the clinics filed five complaints against appellants Progressive Insurance Co. and Allstate Indemnity Co. (collectively "insurers"), alleging breach of contract and unfair claims practices in connection with unpaid bills for treatment provided to five patients insured by insurers.2 The insurers answered and counterclaimed alleging that the clinics were formed and operated in violation of the corporate practice of medicine doctrine and seeking damages including payments made to the clinics. The insurers filed a motion for partial summary judgment, arguing that the clinics were not entitled to payment for services provided at the clinics. The district court granted partial summary judgment in favor of the insurers.3 In granting summary judgment, the district court relied on Granger v. Adson, 190 Minn. 23, 250 N.W. 722 (1933), and concluded that because the clinics were practicing "healing" in violation of the corporate practice of medicine doctrine, any contract the clinics had for practicing healing was illegal, against public policy, and void. The district court also concluded that the insurers did not have to pay outstanding bills.

The clinics appealed to the court of appeals. In reversing the district court, the court of appeals held that the corporate employment of chiropractors, physical therapists, and massage therapists did not violate the corporate practice of medicine doctrine. Isles Wellness, Inc. v. Progressive N. Ins. Co., 689 N.W.2d 561, 565 (Minn.App.2004). The insurers sought review of the decision of the court of appeals.4 We granted the insurers' petition for review.

On review of summary judgment, we determine whether there are any genuine issues of material fact and whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990)

. We view the evidence in the light most favorable to the party against whom summary judgment was granted. Hickman v. SAFECO Ins. Co. of Am., 695 N.W.2d 365, 369 (Minn.2005). A motion for summary judgment is granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law. Minn. R. Civ. P. 56.03.

Key to the disposition of this case is the vitality and applicability of the corporate practice of medicine doctrine in Minnesota. The insurers argue that summary judgment was properly granted because the corporate practice of medicine doctrine exists in Minnesota and that the clinics' corporate structure violates that doctrine. In contrast, the clinics argue that the corporate practice of medicine doctrine has not been adopted in Minnesota and that, even if it has been adopted, it should not be applied in this case. In order to provide context for these arguments, we first address the origin and history of the doctrine.

Historically, corporations were not permitted to engage in "learned professions" through the employment of licensed professionals except pursuant to specific statutory or regulatory exceptions. 1A William Meade Fletcher et al., Fletcher Cyclopedia of the Law of Private Corporations § 97 (perm.ed., rev.vol.2002); see also State v. Bailey Dental Co., 211 Iowa 781, 234 N.W. 260, 263 (1931); Liberty Mut. Ins. Co. v. Hyman, 334 N.J.Super. 400, 759 A.2d 894, 899 (Law.Div.2000). Cases applying a common law prohibition on corporate practice have addressed health care fields such as medicine, dentistry, optometry, and chiropractic. See, e.g., People by Kerner v. United Med. Serv., Inc., 362 Ill. 442, 200 N.E. 157, 163-64 (1936) (prohibiting the corporate practice of medicine); Bailey Dental Co., 234 N.W. at 263 (prohibiting the corporate practice of dentistry); Liberty Mut. Ins. Co.,759 A.2d at 900 (prohibiting the corporate practice of chiropractic); Ezell v. Ritholz, 188 S.C. 39, 198 S.E. 419, 424 (1938) (prohibiting the corporate practice of optometry). This prohibition on corporate practice of health care professions is often referred to as the "corporate practice of medicine doctrine." Liberty Mut. Ins. Co.,759 A.2d at 900.

Several states have statutes expressly adopting a prohibition on the corporate practice of medicine. See, e.g., Colo.Rev.Stat. § 12-36-117(m) (2004); see also D. Cameron Dobbins, Survey of State Laws Relating to the Corporate Practice of Medicine, 9 No. 5 The Health Law. 18 (1997). When adopted by state courts, the general prohibition on corporate employment of licensed health care professionals has been based on a corporation's inability to satisfy the training and licensure requirements set out in state statutes and related public policy considerations.5 See, e.g., People by Kerner, 200 N.E. at 163 ("The legislative intent manifest from a view of the entire [Medical Practice Act] is that only individuals may obtain a license thereunder. No corporation can meet the requirements of the statute essential to the issuance of a license."); Bailey Dental Co., 234 N.W. at 263 ("Inasmuch as a corporation, by its very nature, is incapable of passing an examination for the purpose of a license, and therefore incapable of receiving a license, it cannot lawfully practice dentistry in this state."); cf. Bartron v. Codington County, 68 S.D. 309, 2 N.W.2d 337, 342-46 (1942) (prohibiting corporate practice of medicine on a public policy rationale, but concluding that corporate employment of a licensed practitioner does not violate the licensing requirements of the Medical Practice Act). The related public policy considerations underlying the prohibition on corporate practice of a profession include concerns raised by the specter of lay control over professional judgment, commercial exploitation of health care practice, and the possibility that a health care practitioner's loyalty to a patient and an employer will be in conflict. See, e.g., Parker v. Bd. of Dental Exam'rs, 216 Cal. 285, 14 P.2d 67, 72 (1932); Bartron, 2 N.W.2d at 342-46.

State v. Bailey Dental Co., an Iowa case, illustrates the policy concerns underlying the corporate practice of medicine doctrine and emphasizes the central role state licensure and education requirements play in the doctrine's rationale. Bailey Dental Co., 234 N.W. at 262. In Bailey Dental Co., the Iowa Supreme Court held that a corporation that employed licensed dentists was engaged in the illegal practice of dentistry. Id. at 263. In reaching its conclusion that a corporation could not lawfully practice dentistry through the employment of licensed dentists, the court focused on state licensing statutes and the training required to obtain a license to practice dentistry. Id. at 262. Noting a corporation's inability to meet the licensing requirements, the court stated:

There are certain fields of occupation, which are universally recognized as "learned professions." Proficiency in these occupations requires long years of special study and of special research and training and of learning in the broad field of general education. Without such preparation proficiency in these professions is impossible. The law recognizes them as a part of the public weal and protects them against debasement and encourages the maintenance therein of high standards of education, of ethics and of ideals. It is for this purpose that rigid examinations are required and conducted as preliminary to the granting of a license. The statutes could be completely avoided and rendered nugatory, if one or more persons, who failed to have the requisite learning to pass the examination, might nevertheless incorporate themselves formally into a corporation in whose name they could practice lawfully the profession which was forbidden to them as individuals. A corporation, as such, has neither education, nor skill, nor ethics. These are sine qua non to a learned profession.
* * * *
Inasmuch as a corporation by its very nature, is incapable of passing an examination for the purpose of a license, * * * it cannot lawfully practice dentistry in this state.

Id. at 262-63.

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