PERFORMANCE DYNAMICS, INC. v. FLYNN et al
Filing
115
ORDER granting 104 Motion to enforce mediation agreement. The Defendants have failed to provide the Court with reason to find the April 20, 2015, Agreement unenforceable. The parties shall submit to the Court a proposed injunction within 14 days of the date of this Entry. Signed by Judge William T. Lawrence on 7/18/2016. (CBU)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
PERFORMANCE DYNAMICS, INC,
Plaintiff,
vs.
TIMOTHY W. FLYNN, ANDREW
BENNETT, COLORADO PHYSICAL
THERAPY SPECIALISTS, LLC, P.C.,
TEXAS PHYSICAL THERAPY
SPECIALISTS, PC,
EVIDENCE IN MOTION, LLC,
ROBERT WAINNER, and
LAURENCE BENZ,
Defendants.
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ENTRY ON MOTION TO ENFORCE MEDIATION AGREEMENT
This cause is before the Court on the Plaintiff’s motion to enforce mediation agreement
(Dkt. No. 104). The motion is fully briefed, 1 and the Court, being duly advised and for the
reasons set forth below, GRANTS the Plaintiff’s motion.
I.
STANDARD
“[A] district court possesses the inherent or equitable power summarily to enforce an
agreement to settle a case pending before it.” Wilson v. Wilson, 46 F.3d 660, 664 (7th Cir.
1995). An agreement to settle claims in a federal court is enforceable “just like any other
1
The Court notes that the Plaintiff initially sought, pursuant to this Court’s Local A.D.R.
Rule 2.6(e)(3), a hearing related to its motion. See Dkt. No. 104 at 3. In its Entry Regarding
Motion to Enforce Mediation Agreement (Dkt. No. 106), the Court explained that Local A.D.R.
Rule 2.6(e)(3) is inapplicable in this instance and requested that, “[i]f either party believe[d] an
evidentiary hearing [was] necessary, they shall explain why and list the witnesses to be called at
the hearing and an estimate of the amount of time the hearing would take.” Neither party
provided the Court with such information, and the Court does not deem a hearing necessary for
the purpose of ruling on the Plaintiff’s motion.
contract.” Dillard v. Starcon Int’l, Inc., 483 F.3d 502, 506 (7th Cir. 2007); see also Georgos v.
Jackson, 790 N.E.2d 448, 453 (Ind. 2003) (“Settlement agreements are governed by the same
general principles of contract law as any other agreement.”) (citing Ind. State Highway Comm’n
v. Curtis, 704 N.E. 1015, 1018 (Ind. 1998)). “State contract law governs issues concerning the
formation, construction, and enforcement of settlement agreements.” Beverly v. Abbott Labs.,
817 F.3d 328, 333 (7th Cir. 2016) (citations omitted). In their briefing, the parties rely on
Indiana law to support their positions. The Court, accordingly, turns to Indiana substantive law
in reviewing the parties’ claims.
II.
BACKGROUND
Plaintiff Performance Dynamics, Inc. (“Performance Dynamics”) alleges that it maintains
proprietary rights in a physical therapy methodology known as ASTYM®. ASTYM techniques
require the use of topically applied proprietary hand-held instruments to treat soft tissue injuries
and dysfunction. The Defendants comprise both business entities providing continuing
education to physical therapists and those providing physical therapy to patients and the
individuals who own or are in upper management of the defendant business entities.
Performance Dynamics sued the Defendants in state court in Delaware County, Indiana, alleging
breach of contract and misappropriation of confidential information in violation of the Indiana
Trade Secrets Act. In February 2013, the case was removed to this Court pursuant to 28 U.S.C.
§§ 1441(a) and (b)(2) and 1446(a) and (c). Performance Dynamics filed an amended complaint
in September 2013, alleging additional claims of violation of the Lanham Act, common law
trademark infringement, unfair competition, and tortious interference. Magistrate Judge Baker
held a settlement conference in December 2013. No settlement was reached. The parties
proceeded by filing a case management plan to the Court and beginning discovery.
2
During discovery, Performance Dynamics was granted leave to file a second amended
complaint, adding Robert Wainner and Laurence Benz as defendants. In January 2015, the
Defendants moved to dismiss a portion of the claims and filed counterclaims against
Performance Dynamics, alleging breach of contract, fraudulent misrepresentation, and violation
of the Virginia Wiretap Act. In February 2015, Performance Dynamics moved for partial
summary judgment as to the Defendants’ fraudulent misrepresentation and violation of Virginia
Wiretap Act counterclaims.
With those motions pending, Magistrate Judge Baker held a second settlement conference
on April 20, 2015. The settlement conference lasted approximately six hours. All parties were
represented by counsel for the duration of the conference. A settlement agreement was executed
at the conference (the “Agreement”). The Agreement was memorialized on seven pages,
including two pages containing handwritten mark-ups to a document that had been provided by
Performance Dynamics’ counsel to defense counsel on April 17, 2015; a sheet of notebook paper
with handwritten terms; and three pages containing handwritten mark-ups to a proposed
permanent injunction entry provided by Performance Dynamics’ counsel to defense counsel on
April 16, 2015. “[T]he parties and their counsel believed they had the basis of a settlement and
in good faith so advised the Court.” Dkt. No. 112 at 2. Magistrate Judge Baker entered an order
on April 22, 2015, indicating that “[s]ettlement discussions were held, and this case is now
settled.” Dkt. No. 95. In the order, Judge Baker denied the pending motions as moot, vacated all
previously ordered deadlines, and directed the parties to file within 28 days “a proposed
injunction and any other documents to effectuate settlement.” Id.
Defense counsel agreed to compose a clean, typewritten version of the Agreement. On
June 4, 2015, defense counsel sent a typed document entitled “Settlement Agreement and Mutual
3
Release” to Performance Dynamics’ counsel. See Dkt. No. 113-1. The typed version
intentionally omitted the following term from the Agreement: “No other instrumented soft tissue
treatment shall be provided at any such facility” (the “Omitted Term”). In their briefing, the
Defendants state as follows:
The [D]efendants and their counsel acknowledge that the [Omitted Term] should
have been either struck from the document that was signed at the conclusion of the
settlement conference or that document [should have been] revised before signature
so as to make the reference to the use of other ‘instrumented soft tissue treatment’
subject to the ‘recommend and encourage’ modifying language that was
handwritten in the margin of the document [to alter another term in the same
paragraph as the Omitted Term].
Dkt. No. 112 at 3-4. Neither occurred on April 20, 2015. They contend, however, that their
counsel “orally advised all other persons at the mediation, including the Magistrate Judge,
[Performance Dynamics]’ representatives, and [Performance Dynamics]’ counsel, that the
[D]efendants could not and would not agree to any provision in any settlement agreement that
would limit the use of treatments that individual physical therapists in their professional
judgment deemed necessary and appropriate for their patients.” Id. at 4.
Performance Dynamics now moves to enforce the terms of the Agreement, which
includes the Omitted Term. Jurisdiction is properly predicated upon the diversity of citizenship
between the parties.
III.
DISCUSSION
“Indiana strongly favors settlement agreements. . . . [I]f a party agrees to settle a pending
action, but then refuses to consummate his settlement agreement, the opposing party may obtain
a judgment enforcing the agreement.” Georgos, 790 N.E.2d at 453 (citations omitted).
Performance Dynamics contends that a settlement agreement was formed at the April 20, 2015,
settlement conference and seeks the enforcement of the terms of that agreement. The Defendants
4
respond that no enforceable contract was formed because the Agreement lacked essential terms
and there was no meeting of the minds with respect to the meaning of “instrumented soft tissue
treatment” in the Omitted Term, which makes the term ambiguous. 2 They also argue that, even
if an enforceable contract were formed by the Agreement, the Omitted Term violates public
policy, so the contract would be unenforceable due to mutual mistake.
A.
Mutual Assent
Under Indiana law, “[t]he existence of a contract is a question of law, and the basic
requirements of a contract are offer, acceptance, consideration, and a “meeting of the minds.” 3
Jonas v. State Farm Life Ins. Co., --- N.E.3d ----, 2016 WL 1248589, at *4 (Ind. Ct. App. March
30, 2016) (citing Batchelor v. Batchelor, 853 N.E.2d. 162, 165 (Ind. Ct. App. 2006)). “The
cardinal rule of contract interpretation is to ascertain the intention of the parties’ [sic] from their
expression of it.” Centennial Mortg., Inc. v. Blumenfeld, 745 N.E.2d 268, 277 (Ind. Ct. App.
2001). “The intent relevant in contract matters is not the parties’ subjective intents but their
outward manifestation of it.” Zimmerman v. McColley, 826 N.E.2d 71, 77 (Ind. Ct. App. 2005)
(citing Centennial Mortg., Inc., 745 N.E.2d at 277). “A court does not examine the hidden
intentions secreted in the heart of a person.” Id. Rather, “[i]n most cases, the intent of the
parties to a contract is to be determined by the ‘four corners’ of the contract.” Dick Corp. v.
Geiger, 783 N.E.2d 368, 374 (Ind. Ct. App. 2003) (citing Keithley’s Auction Serv. v. Wright, 579
N.E.2d 657, 659 (Ind. Ct. App. 1991)); see also Beverly, 817 F.3d at 333 (referring to analogous
2
The Defendants incorrectly merge two different legal arguments – whether there was a
meeting of the minds and whether the Omitted Term was ambiguous. The Court uncouples them
and separately examines whether there was a meeting of the minds as to the Agreement and
whether “instrumented soft tissue treatment” is ambiguous.
3
The Defendants do not allege any defenses regarding the other basic requirements of
contract formation – offer, acceptance, and consideration.
5
Illinois law: “[T]he written records of the parties’ actions – rather than their subjective mental
processes – drive the inquiry.”) (internal quotation omitted).
In this instance, the Court looks to the Agreement. By all outward appearances, the
parties entered into a legally enforceable contract at the settlement conference. Specifically, they
mediated their dispute, and using various documents exchanged prior to the settlement
conference, they created and signed the Agreement “late in the evening at the end of a very long
day of intense negotiation.” Dkt. No. 112 at 2. They also indicated to Magistrate Judge Baker
that they had reached an agreement settling the lawsuit. Moreover, defense counsel sent to
Performance Dynamics a typed agreement on June 4, 2015, without any indication that it
believed an agreement had not been reached on April 20, 2015, or that it found fault with the
terms of the Agreement. See Dkt. No. 113-1 at 1. These facts show that the intent of the parties
was to create an enforceable contract on April 20, 2015, and a meeting of minds occurred with
regard to the Agreement. 4
B.
Ambiguity
Given the existence of a contract, the Court now analyzes whether the “instrumented soft
tissue treatment” language in the Omitted Term is ambiguous. Whether a contract is ambiguous
is a question of law for the court. McCae Mgm’t Corp. v. Merchants Nat. Bank & Trust Co. of
4
The Defendants state in their brief that “neither the [D]efendants nor their counsel
noted the retention of the disputed sentence in the document without modification.” Dkt. No.
112 at 4. Although the Defendants do not seek an equitable remedy such as reformation, the
mistake the Defendants and their counsel made does not allow them to avoid the contract’s
terms. A contract may be avoided for unilateral mistake when “one party executes the document
and the other party acts fraudulently or inequitably while having knowledge of the other’s
mistake.” Gierhart v. Consol. Rail Corp.-Conrail, 656 N.E.2d 285, 287 (Ind. Ct. App. 1995).
There are no allegations of such conduct here, and “equity should not intervene . . . where the
complaining party failed to read the instrument, or, if he read it, failed to give heed to its plain
terms.” Id.; see also Angel v. Powelson, 977 N.E.2d 434, 444 (Ind. Ct. App. 2012).
6
Indianapolis, 553 N.E.2d 884, 887 (Ind. Ct. App. 1990); see also Secura Supreme Ins. Co. v.
Johnson, 51 N.E.3d 356, 359-60 (Ind. Ct. App. 2016) (explaining that court determines whether
contract ambiguous and jury ascertains the facts necessary to construe ambiguous contract,
unless the ambiguity “can be resolved without the aid of a factual determination”). In
determining whether ambiguity exists, Indiana courts consider whether “‘a reasonable person
would find the contract subject to more than one interpretation.’” Citimortgage, Inc. v. Barabas,
975 N.E. 2d 805, 813 (Ind. 2012) (quoting Fackler v. Powell, 891 N.E.2d 1091, 1096 (Ind. Ct.
App. 2008)). “However, the terms of a contract are not ambiguous simply because a controversy
exists between the parties concerning the proper interpretation of terms.” Dick Corp., 783
N.E.2d at 374 (citing Ostrander v. Bd. of Dirs. of Porter Cty. Educ. Interlocal, 650 N.E.2d 1192,
1196 (Ind. Ct. App. 1995)).
Under Indiana law, where contract terms are clear and unambiguous, Indiana courts
“apply the plain and ordinary meaning of the terms and enforce the contract according to its
terms.” John M. Abbott, LLC v. Lake City Bank, 14 N.E.3d 53, 56 (Ind. Ct. App. 2014) (citing
Claire’s Boutiques, Inc. v. Brownsburg Station Partners LLC, 997 N.E.2d 1093, 1098 (Ind. Ct.
App. 2013)). However, “[i]f necessary, the text of a disputed provision may be understood by
referring to other provisions within the four corners of the document.” Id. If the Court
determines the document is ambiguous, “all relevant extrinsic evidence may properly be
considered in resolving the ambiguity.” Univ. of S. Ind. Found. v. Baker, 843 N.E.2d 528, 535
(Ind. 2006).
7
In context, the Omitted Term, “[n]o other instrumented soft tissue treatment shall be
provided at any such facility,” appears as follows in paragraph 3 of the Agreement: 5
Dkt. No. 108-1 at 1 (emphasis in original).
The Defendants argue that the full context of paragraph three undermines the idea that
“instrumented soft tissue treatment” is unambiguous. They contend that, because the contract
requires the Defendants to “recommend and encourage” ASTYM training and certification to
clinicians who are providing instrumented soft tissue treatment, such language necessarily
implies that the parties knew that clinicians would provide instrumented soft tissue treatments
other than ASTYM therapy. This argument, however, does not show that “instrumented soft
tissue treatment” is ambiguous.
Rather, in their own ways, the parties understand that ASTYM is a form of instrumented
soft tissue treatment, intervention, or mobilization. 6 See, e.g., Dkt. No. 112 at 18 (Defendants
5
The parties also use the term “instrumented soft tissue treatment” without further
definition in another provision of the Agreement, but the Defendants do not contend that the term
is ambiguous in that context: “Each of the Defendants . . . are ENJOINED from directly or
indirectly . . . [t]eaching, instructing, promoting, making representations about, or advising
anyone in instrumented soft tissue treatment or intervention.” Dkt. No. 108-1 at 6.
6
Although the parties dispute whether the meaning of the term “instrumented soft tissue
treatment” is ambiguous, they repeatedly use this term and the following variations in their
8
note that “[Performance Dynamics’] ASTYM methods or techniques . . . are a subset within the
much wider and pre-existing set of [instrument-assisted soft tissue mobilizations]); see also id. at
5 (Defendants note that “ASTYM is clearly and merely one variety of [instrument-assisted soft
tissue mobilization]”); see also Dkt. No. 108 at 2 & 8, respectively (Performance Dynamics
identifies “instrument assisted soft tissue mobilizations” as “imitators” of ASTYM and
“instrumented soft tissue treatment or intervention” as “any ‘knock off’ methodology” of
ASTYM). Even without a detailed definition of “instrumented soft tissue treatment,” the
language of the Omitted Term as a whole unambiguously means that no instrumented soft tissue
treatment other than Performance Dynamics’ ASTYM therapy shall be provided by the
Defendants’ clinicians. As Performance Dynamics points out, “it really doesn’t matter if there
are other forms of instrumented soft tissue treatment that one could confuse with ASTYM
treatment.” Dkt. No. 113 at 8.
The Defendants could have bargained for the “recommend and encourage” language to
apply to the Omitted Term, but they did not. Instead, the parties agreed that “[no] other
instrumented soft tissue treatment shall be provided at any such facility.” Dkt. No. 108-1 at 1.
“Under Indiana law, a party to a contract ‘is presumed to understand and assent to the terms of
the contracts he or she signs.’” John M. Abbott, LLC, 14 N.E.3d at 58 (quoting Sanford v.
Castleton Health Care Ctr., LLC, 813 N.E.2d 411, 418 (Ind. Ct. App. 2004)). Moreover, a party
who has previously authorized a settlement remains bound by its terms even if he changes his
mind. Glass v. Rock Island Ref. Corp., 788 F.2d 450, 454-55 (7th Cir. 1986) (“A party to a
settlement cannot avoid the agreement merely because he subsequently believes the settlement
briefing: “instrument assisted soft tissue mobilization,” “instrumented soft tissue mobilization,”
and “instrumented soft tissue intervention.” For purposes of this entry, the Court assumes these
terms have the same meaning.
9
insufficient.”); see also Beverly, 817 F.3d 328 at 331 (affirming district court’s enforcement of
handwritten settlement agreement under Illinois law); Pohl v. United Airlines, Inc., 213 F.3d
336, 337 (7th Cir. 2000) (affirming district court’s enforcement of an oral settlement agreement
under Indiana law). The Defendants are sophisticated parties – they could have bargained for
different terms. They failed to do so, however, and the Court must not protect parties from their
own oversights.
In seeking that the Court find the Omitted Term ambiguous, the Defendants also contend
that the term “instrumented soft tissue treatment” includes “common, non-commercial and nonproprietary techniques, many of which have existed and been used for a very long time” and
which they say Performance Dynamics agreed were not intended to be restricted by the
Agreement. Dkt. No. 112 at 19. They argue that Performance Dynamics was unwilling to alter
the contract language to allow the Defendants to use certain instrumented soft tissue treatments
or otherwise enter into a separate letter agreement with respect to the same. Id. at 20. These
arguments, however, do not lead to the conclusion that the Omitted Term is ambiguous.
While Performance Dynamics agreed that the Agreement was not meant to restrict the
Defendants from using certain instruments, including foam rollers, cans, or roller balls, which
are not used in ASTYM therapy, and stated that it “would provide a letter to that effect if that
would clarify it for [the] Defendants,” it correctly noted that it had no obligation to renegotiate
the unambiguous language of the Agreement. Dkt. No. 113 at 9.
Paradoxically, the Defendants also contend that “there was no clarifying definition in the
[Agreement] because one is not needed if the [Omitted Term] is subject to the [‘]recommend and
10
encourage[’] language referred to above.” 7 Dkt. No. 112 at 19. Here, the Defendants undermine
their contention that the term is ambiguous. It is clear that changing the Omitted Term to “The
Defendants shall recommend and encourage that no other instrumented soft tissue treatment shall
be provided at any such facility” would alter the obligations of the Defendants, but that change
would in no way define the term “instrumented soft tissue treatment” more concretely than the
term currently found in the Agreement.
The Court finds the Omitted Term unambiguous. Accordingly, the Defendants remain
bound by its terms, even if they had a change of heart after the settlement conference. See Glass,
788 F.2d at 454-55.
C.
Essential Terms
The Defendants state that “[t]he parties and their counsel did in fact believe that after the
settlement conference that [sic] they had the basis of a settlement.” Dkt. No. 112 at 9. They
argue, however, that no contract was formed by the Agreement because it “does not demonstrate
agreement on multiple essential terms.” Dkt. No. 112 at 9. Specifically, the Defendants argue
that the Agreement failed to include a sum to be paid by the Defendants and specific arbitration
language, including the name of an arbitrator. Dkt. No. 112 at 9.
“[O]nly essential terms need be included in order to render a contract enforceable.”
Wolvos v. Meyer, 668 N.E.2d 671, 676 (Ind. 1996). “The failure to demonstrate agreement on
essential terms of a purported contract negates mutual assent and hence there is no contract.”
Ochoa v. Ford, 641 N.E.2d 1042, 1044 (Ind. Ct. App. 1994); see also Schuler v. Graf, 862
7
As noted earlier, in their briefing, the Defendants state that “[t]he Defendants and their
counsel acknowledge that [the Agreement should have been] revised before signature so as to
make the reference to the use of other ‘instrumented soft tissue treatment’ subject to the
‘recommend and encourage’ modifying language. . . .” Dkt. No. 112 at 3-4.
11
N.E.2d 708, 715 (Ind. Ct. App. 2007) (“If a party cannot demonstrate agreement on one essential
term of the contract, then there is no mutual assent and no contract is formed.”) (quotation
omitted).
“Parties, [however], may make an enforceable contract which obligates them to execute a
subsequent final written agreement,” as long as agreement is “expressed on all essential terms
that are to be incorporated in the document.” Sands v. Helen HCI, LLC, 945 N.E.2d 176, 180
(Ind. Ct. App. 2011) (citing Wolvos, 668 N.E.2d at 674). That is what happened here. The
parties entered into a binding contract on April 20, 2015, but planned to execute a clean version,
which was “understood to be a mere memorial of the agreement already reached” on April 20,
2015. Id. Moreover, the Agreement is not lacking the essential terms claimed by the
Defendants. Neither a settlement payment amount nor arbitration language, with the exception
of the name of an arbitrator, was missing from the April 20, 2015 Agreement. 8 The Agreement
includes an $85,000.00 settlement payment amount, which had been redacted in two versions of
the document submitted to the Court. Performance Dynamics submitted an unredacted version
of the document (Dkt. No. 113-4), which clearly shows that this term existed in the Agreement
on April 20, 2015. Additionally, the arbitration language the Defendants claim was lacking on
page two of the agreement appears on page six. Moreover, on both pages, the parties clearly
signify, using the annotation “,” that the language on page six is the language to be
incorporated into page two’s text. Hence, the essential terms the Defendants claim were missing
8
As Performance Dynamics argues in its response brief, the arbitration language of the
Agreement contemplates a scenario where the parties do not agree on an arbitrator: “[I]n the
event the parties can’t agree on an arbitrator, or the arbitrator cannot serve, each party shall select
an arbitrator and these shall select a third.” See Dkt. No. 113 at 6 (quoting Dkt. No. 108-1 at 6).
Because disagreement on an arbitrator was a contingency that the parties anticipated, the
inclusion of an arbitrator’s name was not a material or essential term.
12
are explicitly contained in the Agreement. Accordingly, the Court does not find the Agreement
unenforceable for lack of those terms.
D.
Public Policy and Mutual Mistake
The Defendants also argue that the Omitted Term violates public policy and therefore,
creates a mutual mistake that renders the contract void. They contend that the Omitted Term
violates both the American Physical Therapy Association’s Code of Ethics (“APTA Code of
Ethics”) and the corporate practice of medicine doctrine.
“Where a properly formed agreement contravenes the public policy of Indiana, . . . courts
have traditionally said it is void and unenforceable.” Straub v. B.M.T. by Todd, 645 N.E.2d 597,
599 (Ind. 1994) (explaining, however, that “[i]t may well be more exact to say that where an
agreement violates public policy, no contract is created”). The doctrine of mutual mistake
provides that “[w]here both parties share a common assumption about a vital fact upon which
they based their bargain, and that assumption is false, the transaction may be avoided if because
of the mistake a quite different exchange of values occurs from the exchange of values
contemplated by the parties.” Tracy v. Morell, 948 NE2d 855, 864 (Ind. Ct. App. 2011); see also
Stainbrook v. Low, 842 N.E.2d 386, 397 (Ind. Ct. App. 2006). “[B]ecause [Indiana courts] value
freedom of contract so highly,” contracts are not automatically voided unless a statute contains
clear, unambiguous language indicating that the legislature intended such a result. Imperial Ins.
Restoration & Remodeling, Inc. v. Costello, 965 N.E.2d 723, 728 (Ind. Ct. App. 2012) (internal
quotation and citation omitted). Where public policy is not explicit, for example, as here where
the policy is not contained in a statute, Indiana courts “find an agreement void only if it has a
tendency to injure the public, is against the public good or is inconsistent with sound policy and
good morals.” Straub, 645 N.E.2d at 599 (citations omitted). Indiana courts “support the
13
traditional precaution against the reckless use of public policy as a means for invalidating
contracts . . . [and] ha[ve] embraced the notion that the power of the courts to declare a contract
void for being in contravention of sound public policy is a very delicate and undefined power.”
Id. at 599 n. 3 (citations omitted).
1.
APTA Code of Ethics
The Defendants argue that the Omitted Term violates the APTA Code of Ethics by
“compromis[ing] the independent and objective professional judgment of the affected physical
therapists by dictating what [instrument-assisted soft tissue mobilization] therapy methods and
techniques they can and cannot use.” Dkt. No. 112 at 12. They further contend that “restricting
available services that physical therapists can provide . . . puts them in an impermissible conflict
of interest between their employer and their patients.” Id. at 12-13.
The Defendants reference the following five principles of the APTA Code of Ethics in
their brief:
Principle 3: Physical therapists shall be accountable for making sound professional
judgments;
Principle 3A: Physical therapists shall demonstrate independent and objective
professional judgment in the patient’s/client’s best interest in all practice settings;
Principle 3D: Physical therapists shall not engage in conflicts of interest that
interfere with professional judgment;
Principle 7: Physical therapists shall promote organizational behaviors and
business practices that benefit patients/clients and society; and
Principle 7A: Physical therapists shall promote practice environments that support
autonomous and accountable professional judgment.
Assuming that the provisions of the APTA Code of Ethics express the public policy of
Indiana, the Omitted Term does not violate Indiana public policy because it does not violate the
APTA Code of Ethics.
14
The Defendants take issue with the restriction that the Omitted Term places on the
services their physical therapists may provide to patients. Health care facilities, however,
routinely limit the services their providers deliver to patients. See, e.g., Peiyin Hung, Katy B.
Kozhimannil, Michelle M. Casey, and Ira S. Moscovice, Why Are Obstetric Units in Rural
Hospitals Closing Their Doors?, HEALTH SERVS. RES. doi: 10.1111/1475-6773.12441 (2016),
http://onlinelibrary.wiley.com/doi/10.1111/1475-6773.12441/full (discussing closure of labor
and delivery units in 306 rural hospitals, which, in turn, eliminated all labor and delivery services
provided by local obstetricians). Additionally, in some states, physical therapists are restricted
from performing any services, with very limited exception, without a physician’s prescription or
referral. See, e.g., Ala. Code § 34-24-210.1 (providing for five circumstances under which
physical therapists can perform services without a prescription or referral); Miss. Code § 73-2335(3) (same). The Defendants themselves explain that other health care providers limit the
treatment a physical therapist may offer to its patient: “[A] physical therapist can only practice
physical therapy consistent with another medical professional’s orders. It is easy to imagine a
scenario where a medical professional orders a treatment that is not ASTYM.” Dkt. No. 112 at
15-16. Physical therapists routinely practice under such restrictions, and there is no indication
that these restrictions lead to impairments in professional judgment or conflicts of interest.
Similarly, the Omitted Term limits the types of instrumented soft tissue treatments
offered by the Defendants’ physical therapists. This limitation, likewise, does not impair the
physical therapists’ professional judgment or create conflicts of interest. The Court agrees with
Performance Dynamics:
Whether or not the [Omitted Term] is part of the [April 20, 2015] Agreement (and
thereby whether or not ‘other instrumented soft tissue treatment’ is provided at [the]
Defendants’ facilities), the physical therapists who work at the Defendants’
15
facilities are perfectly free (and should be encouraged) to follow the provisions of
the APTA Code of Ethics.
Dkt. No. 113 at 13. If the Defendants’ physical therapists cannot provide a particular treatment
to a patient by reason of limitations set forth in the Agreement or otherwise, as Performance
Dynamics points out, APTA Code of Ethics Principle 3C provides guidance on referring patients
to other practitioners: “‘Physical therapists shall make judgments within their scope of practice
and level of expertise and shall communicate with, collaborate with, or refer to peers or other
health care professionals when necessary.’” Id. (quoting Dkt. No. 112-3 at 2). Accordingly,
even if Indiana recognized the APTA Code of Ethics as its public policy, the Omitted Term does
not violate it.
2.
Corporate Practice of Medicine Doctrine
The Defendants also contend that the Omitted Term violates public policy because it
contravenes the corporate practice of medicine doctrine, which “protect[s] [a medical]
practitioner’s professional autonomy from lay interference or commercial exploitation.” Dkt.
No. 112 at 13 (internal quotation omitted). Generally, the corporate practice of medicine
doctrine requires that medical service providers be licensed and prohibits the ownership of
medical practices by non-licensed entities and individuals. As the Defendants explain, the
rationale underlying the doctrine “protect[s] physician-patient relationships from being
undermined by the intrusion of a lay corporation not bound by medical ethics . . . [and] also
prevents employee practitioners from feeling a divided sense of loyalty between the profitseeking employer and the treatment-seeking patient.” Id. at 14 (internal quotations omitted).
16
As the Defendants correctly indicate, the corporate practice of medicine doctrine applies
in various forms in Indiana, Colorado, and Texas. 9 However, neither Indiana nor Texas
explicitly recognize a prohibition on the corporate practice of physical therapy. Rather, with
exceptions for certain corporate forms, Indiana recognizes the doctrine’s applicability to
physicians and dentists. See Ind. Code §§ 25-22.5-1-2; 25-14-1-1. Texas similarly limits the
doctrine’s application to licensed physicians. See McCoy v. FemPartners, Inc., 484 S.W.3d 201,
205 (Tex. Ct. App. 2015) (examining statutes codifying Texas corporate practice of medicine
doctrine). The Court declines to impose prohibitions where they have not been imposed by the
legislatures or courts of Indiana and Texas. Accordingly, the Court finds that the corporate
practice of medicine doctrines found in those states are inapplicable to physical therapists and,
therefore, are not violated by the Omitted Term.
Colorado, however, recognizes a corporate practice of medicine doctrine that prohibits
the practice of physical therapy by certain types of corporations. See Colo. Rev. Stat. § 12-41124. Without a definitive statement from the Defendants, the Court presumes, as Performance
Dynamics did, that Defendant Colorado Physical Therapy Specialists, LLC, P.C., was formed
under a corporate exception within the statute, thus allowing the corporation to practice physical
therapy. For physical therapists working for such corporations, Colorado statute directs that
“[n]othing in this section diminishes or changes the obligation of each person licensed to practice
physical therapy and employed by the corporation to practice in accordance with the standards of
professional conduct under this article and rules adopted under this article.” Colo. Rev. Stat. §
12-41-124(3). Furthermore, the statute prohibits the corporation from doing anything “that, if
9
The Court notes that Defendant Evidence in Motion, LLC is a Kentucky limited
liability company. See Dkt. No. 107 at 2. The Defendants do not argue that Kentucky public
policy voids the Omitted Term or the Agreement, so the Court does not address the issue.
17
done by a person licensed to practice physical therapy and employed by the corporation would
constitute any ground for disciplinary action, as set forth in section 12-41-115.” Colo. Rev. Stat.
§ 12-41-124(2). Having reviewed the grounds for disciplinary action found in Colorado Revised
Statute section 12-41-115 and the “Colorado Physical Therapist Licensure & Physical Therapist
Assistant Certification Rules and Regulations” found in volume 4, section 732-1 of the Colorado
Code of Regulations, the Court concludes that the Omitted Term does not violate Colorado’s
corporate practice of medicine doctrine as applied to physical therapists.
In sum, the Court finds no mutual mistake based on a violation of public policy, either by
way of the APTA Code of Ethics or the corporate practice of medicine doctrine. Consequently,
the Defendants have not demonstrated that the Agreement is unenforceable due to violation of
Colorado, Kentucky, Indiana, or Texas public policy.
III.
CONCLUSION
The Defendants have failed to provide the Court with reason to find the April 20, 2015,
Agreement unenforceable. Therefore, the Court GRANTS the Plaintiff’s motion to enforce
mediation agreement (Dkt. No. 104). The parties shall submit to the Court a proposed injunction
within 14 days of the date of this Entry.
SO ORDERED: 7/18/16
_______________________________
Hon. William T. Lawrence, Judge
United States District Court
Southern District of Indiana
Copies to all counsel of record via electronic notification.
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