Selma Medical Center, Inc. v. Fontenot

• Decision Date: 03 August 2001
• Citation: 824 So.2d 668
• Parties: SELMA MEDICAL CENTER, INC., d/b/a Columbia Four Rivers Medical Center v. Dr. Wilfred Joseph FONTENOT et al.
• Court: Alabama Supreme Court

824 So.2d 668

SELMA MEDICAL CENTER, INC., d/b/a Columbia Four Rivers Medical Center v. Dr. Wilfred Joseph FONTENOT et al.

1991793.

Supreme Court of Alabama.

August 3, 2001.

Rehearing Denied January 11, 2002.

Joe A. Joseph and J. Dawn Smith of Lange, Simpson, Robinson & Somerville, L.L.P., Birmingham, for appellant.

Kathleen B. Morris of Morris & McDermott, L.L.C., Montgomery, for appellees.

SEE, Justice.

The defendant, Selma Medical Center, Inc., d/b/a Columbia Four Rivers Medical Center (the "Hospital") appeals from the trial court's order enjoining the arbitration proceeding it had initiated in a dispute with Dr. Wilfred Joseph Fontenot, Dr. David Christopher Braswell III, and a corporation of which they were shareholders, Selma Anesthesia & Pain Management, P.C. (all three referred to hereinafter as the "Physicians"). The trial court granted the Physicians' motion to stay arbitration proceedings on the ground that the Hospital had not met its burden of demonstrating that the transactions at issue "involve or have any substantial effect on interstate commerce." We reverse and remand.

I.

In 1996, the Hospital, realizing that the Selma community needed at least one more anesthesiologist, contacted Dr. David Braswell III and Dr. Wilfred Joseph Fontenot, who were working in South Carolina, to recruit them to relocate to Selma. At that time, both Dr. Braswell and Dr. Fontenot were completing their anesthesia residencies. Over the course of several months, Dr. Braswell and Dr. Fontenot traveled to Selma to meet with Robert Bigley, the Hospital's chief executive officer, and with other members of the Hospital's staff, to negotiate personal-services contracts calling for the doctors to relocate their medical practices to Alabama.

On October 21, 1996,¹ the Hospital entered two separate, but identical, "Recruiting Agreements" (the "Agreements") with Drs. Braswell and Fontenot (each agreement also with Selma Anesthesia & Pain Management, P.C.).² Under the Agreements, the Physicians would relocate their medical practices from South Carolina and maintain a full-time medical practice in Selma, where they would be the exclusive providers of all anesthesia services performed at the Hospital.

The Agreements provide that the Hospital guaranteed Drs. Braswell and Fontenot $500,000 in gross cash receipts for the one-year period January 6, 1997, through January 5, 1998 (the "Guarantee Period"), but that if the Physicians'"Net Collectible Revenue"³ exceeded $500,000 during that period, they would repay the Hospital the difference. The Agreements provide for binding arbitration, to be conducted in accordance with the rules of the American Arbitration Association.⁴ By their terms, the Agreements were not to be effective or legally binding on the parties until "reviewed and approved in writing by a Senior Vice President or the President of the owner of the Hospital and by the Hospital's Legal Counsel."

The Hospital claimed, but the Physicians disputed, that the Physicians owed the Hospital excess revenue collected during the period January 6, 1997, through January 5, 1998. On April 8, 1999, the Hospital filed a "Demand for Arbitration" with the American Arbitration Association ("AAA"), seeking reimbursement of "approximately $325,583.20 plus any applicable interest, fees, and/or costs," advanced under the "Net Collectible Revenue Guarantee" of the Agreement.

The Physicians did not submit their selections of arbitrators from the AAA panel, as is required under the Agreements and by the American Arbitration Association,⁵ but, instead, sought and received two extensions to the deadlines set by the AAA.⁶ When the Physicians still failed to submit their selections of arbitrators, the AAA appointed the arbitrators that had been selected by the Hospital.⁷ The Physicians then refused to participate further in the arbitration, despite the Arbitration Panel's invitation to them to submit evidence supporting their allegations of fraud in the procurement of the Agreements.

The hearing by the Arbitration Panel was scheduled for May 12, 2000, in Birmingham. On May 1, 2000, in the Circuit Court of Montgomery County, the Physicians filed a document styled "Plaintiffs' Complaint for Declaratory Judgment and Motion for Stay of Arbitration." At the same time, they moved for a temporary restraining order or for a preliminary injunction. The Physicians alleged that (1) the Agreements are intrastate in nature, and, therefore, do not impact interstate commerce; (2) the arbitration provisions violate Alabama public policy; (3) the Hospital procured the Agreements through fraud, deceit, and misrepresentation and by denying access to counsel; (4) the Agreements were "boilerplate" in nature and not the subject of "arm's-length negotiations"; (5) the issue of arbitration is one initially for the court; and (6) the arbitration proceedings are unfair and unjust and present a conflict of interest on the part of one of the members of the Arbitration Panel.⁸

In support of their complaint for a declaratory judgment and their motion for a temporary restraining order, the Physicians submitted mirror-image affidavits of Drs. Braswell and Fontenot. Dr. Fontenot's affidavit states, in pertinent part:

"I am ... a resident of Montgomery County, Alabama. I am a physician in Montgomery, Alabama. Prior to moving to Montgomery, I was a partner at Selma Anesthesia & Pain Management, P.C., which was an Alabama Professional Corporation, organized in Dallas County, Alabama, along with Dr. Braswell.

"On October 31, 1996, I traveled with Dr. Braswell to Selma, Alabama to meet with Mr. Robert Bigley, Hospital Chief Executive Officer of Selma Medical Center, Inc., in order to sign the necessary contract papers as required by Selma Medical Center. On November 1, 1996 Dr. Braswell and myself met with Mr. Bigley and signed the personal services contracts and other related documents. I was advised that the legal counsel for Selma Medical Center would also have to review the documents and approve them prior to the contract becoming binding on all parties. Nevertheless, based on the requirements of the contract and the deadlines set out therein, I moved my family to Selma, Alabama in January of 1997 and began working for Selma Medical Center.

"To the best of my knowledge all of the paperwork concerning the contract between Selma Anesthesia & Pain Management, Dr. Fontenot, myself, Selma Medical Center and its representatives [was] originally signed and finalized in Selma, Alabama. During the time that I worked in Selma, I never treated or provided services to anyone except those patients in the Selma community as per the contract provisions."

The trial court directed the parties to submit evidence, by way of affidavit, addressing the question whether the Agreements were interstate or intrastate in nature. The Hospital filed the affidavit of Robert Bigley, the former chief executive officer of the Hospital, who had been responsible for the negotiations that led up to the execution of the October 21, 1996, recruiting agreements. Mr. Bigley's affidavit stated, in pertinent part:

"2. I was formerly employed by Selma Medical Center Hospital, Inc., d/b/a Columbia Four Rivers Medical Center (the `Hospital') as Chief Executive Officer (`CEO') from July, 1995 to April, 1997. The Hospital was an Alabama corporation, located in Selma, AL.

". . . .

"7. As stated in paragraph 8 of the Agreements, the objective of the Hospital in entering into the Agreements was to encourage the Physicians to relocate to Selma, Alabama and `practice medicine and provide professional services to patients in the [Selma] Community.'

"8. During the negotiations preceding the Agreements, the Physicians traveled from South Carolina to Selma, Alabama and met with me and other Hospital employees and other physicians on the active medical staff of the Hospital.

"9. In addition to the income guarantee provided for in the Net Collectible Revenue-Addendum (A) portion of the Agreements, the Hospital agreed to pay the Physicians $15,000 each for expenses `incurred by Physicians in moving [their] personal effects and household furnishings from South Carolina to Selma ...' pursuant to the Relocation-Addendum (D) to the Agreements to pay the Physicians $10,000 each to assist in the `start up expenditures, marketing and other costs ... incurred in locating [their] practice in Selma, Alabama.'

"10. In January 1997, the Physicians commenced practicing medicine in Selma, Alabama pursuant to the Agreements and were the exclusive providers to the Hospital, pursuant to the Professional Services Agreement-Exclusive Provider-Addendum (B) portion of the Agreements.

"11. The Hospital was at the time of the Agreements, and for some time thereafter, an affiliate of Columbia/HCA Healthcare Corporation (`Columbia'), a Tennessee corporation with its principal offices in Nashville, Tennessee.

"12. As set forth in paragraph 13 of the Agreements, the Agreements would not become effective or binding on the Physicians or the Hospital until they were reviewed and approved in writing by a Senior Vice President or the President of Columbia and by the Hospital's Legal counsel. The Agreements were, in fact reviewed and approved by Wayne Gower, a Senior Vice President of Columbia and Stuart McCloy, an in-house attorney with Columbia, both of whom worked in Columbia's offices in Nashville, Tennessee. The Agreements were drafted by Columbia's legal counsel.

". . . .

"14. The Physicians did in fact relocate to Selma, Alabama from South Carolina in approximately January 1997, pursuant to the Agreements, and began providing medical and professional services to the Hospital in the Selma, Alabama community. I was informed by the Physicians that Mr. Robert Hale in South Carolina was handling the Physicians' billing.

"15. As a health care provider, much of the Hospital's revenues were derived from federally funded Medicare or Medicaid programs which

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