Thornton v. TRIDENT MEDICAL CENTER

• Decision Date: 08 December 2003
• Docket Number: No. 3706.,3706.
• Citation: 357 S.C. 91,592 S.E.2d 50
• Court: South Carolina Court of Appeals
• Parties: James C. THORNTON, M.D., Respondent, v. TRIDENT MEDICAL CENTER, L.L.C., d/b/a Trident Medical Center, Appellant.

357 S.C. 91

592 S.E.2d 50

James C. THORNTON, M.D., Respondent, v. TRIDENT MEDICAL CENTER, L.L.C., d/b/a Trident Medical Center, Appellant.

No. 3706.

Court of Appeals of South Carolina.

Submitted November 4, 2003.

Decided December 8, 2003.

Rehearing Denied January 22, 2004.

Allan Shackelford, of Greensboro; and James L. Gale, of Raleigh, for appellant.

G. Dana Sinkler, of Charleston, for respondent.

ANDERSON, J.:

Trident Medical Center (Trident) appeals the circuit court's finding that the agreement between Trident and James C. Thornton does not involve interstate commerce and, therefore, is not subject to the Federal Arbitration Act, 9 U.S.C. § 2 (1999). We reverse.

FACTS/PROCEDURAL BACKGROUND

In 1999, Trident was suffering from a shortage of qualified physicians in its cardiovascular surgery group, South Carolina Cardiovascular Associates ("SCCA"). To alleviate this shortage, Trident began an effort to recruit physicians from other parts of the country to join SCCA. To entice physicians to move to Charleston, Trident offered substantial financial incentives that would not only cover the expenses of relocation but would provide bonuses and a guaranteed income stream for a period of time after their arrival.

Dr. James Thornton (Thornton) was one of the physicians Trident was able to attract to Charleston. In May 1999, Thornton and Trident entered into a "recruiting agreement" in which Thornton agreed to relocate his medical practice as a cardiovascular surgeon from Grand Rapids, Michigan to Charleston. In addition to the principal agreement under which Thornton agreed to relocate to Charleston and maintain his practice there for at least four years, the recruiting agreement contained four addenda: (1) a net collectable revenue guarantee which provided Thornton with a guaranteed income for twenty-four months; (2) a signing bonus; (3) a relocation agreement for payment of moving expenses; and (4) an agreement providing that Thornton was being recruited into the existing practice of SCCA.

Payment of all the financial incentives to Thornton under this agreement was contingent upon Thornton maintaining his practice in Charleston for at least four years. If he failed to do so, the payments made to Thornton under the agreement had to be repaid to Trident. Further, the agreement read: "In the event any dispute shall arise concerning any aspect of this Agreement, such dispute shall be submitted to final and binding arbitration in accordance with rules established by the American Arbitration Association." Thornton moved to Charleston and joined SCCA in August 1999. However, he left the practice and relocated to Pennsylvania before the end of his four-year commitment. Thornton claimed he was excused from his obligations under the recruiting agreement and refused to repay any of the financial incentives he had received from Trident.

Thornton brought the present declaratory judgment action seeking a determination that the arbitration provision contained in the recruiting agreement was unenforceable. The trial court found the provision (1) did not satisfy the requirements set out in § 15-48-10 of the South Carolina Uniform Arbitration Act, and (2) was not enforceable under § 2 of the Federal Arbitration Act ("FAA"), because the transaction between the parties did not involve interstate commerce.

STANDARD OF REVIEW

Determinations of arbitrability are subject to de novo review. Stokes v. Metropolitan Life Ins. Co., 351 S.C. 606, 571 S.E.2d 711 (Ct.App.2002). Nevertheless, a circuit court's factual findings will not be reversed on appeal if there is any evidence reasonably supporting the findings. McMillan v. Gold Kist, Inc., 353 S.C. 353, 577 S.E.2d 482 (Ct.App. 2003); Evans v. Accent Manufactured Homes, Inc., 352 S.C. 544, 575 S.E.2d 74 (Ct.App.2003); Liberty Builders, Inc. v. Horton, 336 S.C. 658, 521 S.E.2d 749 (Ct.App.1999). The question of the arbitrability of a claim is an issue for judicial determination, unless the parties provide otherwise. Zabinski v. Bright Acres Assocs., 346 S.C. 580, 553 S.E.2d 110 (2001); Evans, 352 S.C. at 549, 575 S.E.2d at 76; see also Vestry and Church Wardens v. Orkin Exterminating Co., 356 S.C. 202, 588 S.E.2d 136 (2003) (whether claim is subject to arbitration is issue for judicial determination, unless parties have agreed otherwise).

LAW/ANALYSIS

The parties do not dispute the trial court's finding that the arbitration clause contained in the recruiting agreement is unenforceable under the South Carolina Uniform Arbitration Act, S.C.Code Ann. §§ 15-48-10 to -240 (Supp.2002). If, however, the agreement involves interstate commerce, the FAA applies and trumps the state arbitration laws. See Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996); Soil Remediation Co. v. Nu-Way Envtl., Inc., 323 S.C. 454, 476 S.E.2d 149 (1996).

The FAA provides: "A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The words "involving commerce" have been interpreted by the United States Supreme Court as being the functional equivalent of "affecting commerce"—words signaling "an intent to exercise Congress' commerce power to the full." Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 277, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995); see also Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 2040, 156 L.Ed.2d 46 (2003) ("We have interpreted the term `involving commerce' in the FAA as the functional equivalent of the more familiar term `affecting commerce'—words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power."); Blanton v. Stathos, 351 S.C. 534, 540, 570 S.E.2d 565, 568 (Ct.App.2002) ("The United States Supreme Court has held that the phrase `involving commerce' is the same as `affecting commerce,' which has been broadly interpreted to mean Congress intended to utilize its powers to regulate interstate commerce to its full extent."). "Because the statute provides for the enforcement of arbitration agreements within the full reach of the Commerce Clause, it is perfectly clear that the FAA encompasses a wider range of transactions than those actually in commerce—that is, within the flow of interstate commerce." Citizens Bank, 539 U.S. at 56, 123 S.Ct. at 2040 (internal quotation marks and citations omitted).

Thornton claims the recruiting agreement does not evidence interstate commerce and, consequently, the FAA does not apply. We disagree.

In all cases, determination of whether a transaction involves interstate commerce depends on the facts of the case. Zabinski v. Bright Acres Assocs., 346 S.C. 580, 594, 553 S.E.2d 110, 117 (2001) ("To ascertain whether a transaction involves commerce within the meaning of the FAA, the court must examine the agreement, the complaint, and the surrounding facts."). Thornton argues the recruiting agreement did not involve interstate commerce because it only concerned the performance of his duties as a physician providing medical services within South Carolina.

Thornton is correct in urging this Court to focus upon what the terms of the contract specifically require for performance in determining whether interstate commerce is involved. Our courts consistently look to the essential character of the contract when applying the FAA.

In Mathews v. Fluor Corp., our Supreme Court found interstate commerce was not involved in a contract for the sale of land in South Carolina to out-of-state parties—even though, incident to the sale, the parties obtained the services of a North Carolina engineer and financing from a Pennsylvania lender. Mathews v. Fluor Corp., 312 S.C. 404, 440 S.E.2d 880 (1994),overruled by Munoz v. Green Tree Fin. Corp., 343 S.C. 531, 542 S.E.2d 360 (2001) (overruling Mathews "to the extent it considered whether the parties contemplated interstate commerce as a factor in determining if the FAA applied."). The Court held the transaction was outside the scope of the FAA because it was "unable to discern from the evidence presented whether the contract required respondent to administer anything related to interstate commerce." Mathews, 312 S.C. at 407,440 S.E.2d at 882 (emphasis in original). See also Munoz v. Green Tree Fin. Corp., 343 S.C. 531, 542 S.E.2d 360 (2001) (finding interstate commerce involved in a construction contract where builder was domiciled in South Carolina, but, under the contract, assigned rights to a Delaware creditor); Soil Remediation Co. v. Nu-Way Envtl., Inc., 323 S.C. 454, 476 S.E.2d 149 (1996) (holding interstate commerce involved in contract requiring removal of water and sludge from property in South Carolina to a facility in North Carolina); Timms v. Greene, 310 S.C. 469, 427 S.E.2d 642 (1993) (stating that a contract between a nursing home and patient did not involve interstate commerce, despite the fact that the nursing home was a division of a Delaware partnership, marketed its services to persons residing outside of the state, and purchased the majority of its supplies and equipment from out-of-state; the Court reasoned that the performance of the contract—the provision of patient-resident services in South Carolina—did not require any activities in interstate commerce); Episcopal Hous. Corp. v. Federal Ins. Co., 269 S.C. 631, 640, 239 S.E.2d 647, 652 (1977) (concluding performance required under a contract for the construction of an eighteen-story building involved interstate commerce because "[i]t would be virtually impossible to construct" such a building "with materials, equipment and supplies all produced and manufactured solely within the State of South Carolina."); Blanton v. Stathos, 351 S.C. 534, 541, 570 S.E.2d 565, 569 (...