Kaki, M.D. et al v. Tenet Healthcare Corporation et al

Filing 33

ORDER granting in part and denying in part 25 Motion to Compel; finding as moot 11 Motion to Dismiss. Signed by District Judge Arthur J. Tarnow. (MLan)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DR. AMIR KAKI, M.D., AND DR.
MAHIR ELDER, M.D.,

Case No. 19-10863
SENIOR U.S. DISTRICT JUDGE
ARTHUR J. TARNOW

Plaintiffs,
v.

U.S. MAGISTRATE JUDGE
DAVID R. GRAND

TENET HEALTHCARE CORPORATION,
ET AL.,
Defendants.
/

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’
RENEWED MOTION TO COMPEL ARBITRATION AND DISMISS OR STAY
LITIGATION [25] AND DENYING AS MOOT DEFENDANTS’ MOTION TO DISMISS
AND COMPEL ARBITRATION [11]
Plaintiffs, two cardiologists formerly employed by Defendants, allege that
Defendants engaged in retaliation within the meaning of the False Claims Act, 31
U.S.C. § 3730 (“FCA”), when they took adverse employment action against them.
They also allege a number of state law causes of action, including violations of the
Michigan Medicaid False Claims Act, retaliatory discharge in violation of Michigan
public policy, retaliatory removal of clinical privileges in violation of Michigan
public policy, false light defamation, violation of the Bullard-Plawecki Employee

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Right to Know Act, tortious interference with prospective economic relationships,
and intentional infliction of emotional distress.
Defendants have moved to dismiss the case and compel arbitration, arguing
that many of these claims are subject to mandatory arbitration provisions in contracts
signed by the doctors. The Court will grant this motion in part and compel arbitration
on the sole cause of action arising under federal law, Count I, but it will decline to
exercise supplemental jurisdiction over the state law causes of action.1
FACTUAL BACKGROUND
Plaintiff, Dr. Kaki, is a cardiologist specializing nuclear cardiology, internal
medicine, and interventional cardiology. He was a clinical associate professor of
medicine at Wayne State University School of Medicine and had had staff privileges
at the Detroit Medical Center (“DMC”) since 2012. (First Am. Compl. ¶ 16). In
January 2014, Dr. Kaki was appointed as Director of the Cardiac Catherization
Services Unit at the new “DMC Heart Hospital” located at the VHS Harper-Hutzel
Hospital (“VHS”). (Id. at ¶ 17).
Plaintiff, Dr. Elder, is an interventionalist cardiologist who specializes in
cardiology, endovascular cardiology, nuclear cardiology, internal medicine, and

Also before the Court is a companion case brought by Dr. Theodore Schreiber, a
colleague of Plaintiffs in a similar, but by no means identical, situation. See
Theodore Schreiber, M.D, v. Tenet Healthcare Corporation, et al., Case No. 2:19cv-10965-AJT-SDD. That case has been dismissed without prejudice as well.
1

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interventional cardiology. (Id. at ¶ 24). He served as the Director of the Cardiac Care
Unit, Ambulatory Services Program, Cardiac CT Angiogram, PERT Program,
Carotid Stenting Program, and Endovascular Medicine at the DMC Heart Hospital.
(Id at. ¶ 25). He has also held a Clinical Professorship at Wayne State Medical
School and Michigan State University. (Id. at ¶ 27).
Defendant Tenet Healthcare Corporation (“Tenet”), a for-profit company,
bought Defendants DMC and VHS in 2013, and it owned the DMC Heart Hospital
from its July 2014 opening. (Id. at ¶ 36). The other corporate defendants are VHS of
Michigan, Inc., and VHS Sinai-Grace Hospital, Inc. Additionally, there are several
individual Defendants. Anthony Tedeschi has been the CEO of DMC since 2017 (Id.
at ¶ 9). Scott Steiner was the CEO of DMC from 2012 until his retirement on
February 8, 2019. (Id. at ¶ 10). Eric Evans was the President of Hospital Operation
for Tenet from March 2016 to December 2018. (Id. at ¶ 11). Conrad Mallett, Jr. was
the CEO of Sinai Grace Hospital Since August 14, 2017. (Id. at ¶ 12). John Levy is
the chair of the Joint Conference Committee at the DMC. (Id. at ¶ 13).
The First Amended Complaint provides a narrative wherein the two
cardiologists refused to participate in the drastic scale-down of quality and safety
that Tenet instituted when it purchased DMC in 2013. By their account, the
cardiologists continually spoke out against unsafe, unethical, and illegal medical
practices, including the maintenance of unsterile surgical tools (¶¶ 49-55), cuts to
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the life-saving State Blood Lab from the Cardiac Catherization Unit (¶ 57),
dangerous and unnecessary medical procedures (¶¶ 60-62), fraud with regard to
physician coverage in the Cardiac Team One program (¶¶ 63-68), and fraudulent
billing under Medicaid and Medicare (¶ 48). To silence Plaintiffs and retaliate
against their insubordination, Defendants hired a law firm — Latham & Watkins —
to conduct a review of the doctors in order to provide a pretext to dismiss them and
terminate their contracts. (Id. at ¶ 72). On October 1, 2018, Plaintiffs were
terminated. DMC sent an email to 5,000 DMC employees stating that the
cardiologists were fired for “violations of our standards of conduct.” (Id. at ¶ 79).
PROCEDURAL HISTORY
Plaintiffs filed suit on March 25, 2019. [Dkt. # 1]. On April 17, 2019,
Defendants filed a Motion to Dismiss and Compel Arbitration [11]. Plaintiffs filed
an Amended Complaint [20] on June 4, 2019, and Defendants filed a Renewed
Motion to Compel Arbitration and Dismiss or Stay Litigation [25] on June 18, 2019.
The Court held a hearing on the motions on July 22, 2019. Per the Court’s
instruction, both parties filed supplemental briefs [31, 32] on August 5, 2019.
LEGAL STANDARD
Under the Federal Arbitration Act, 9 U.S.C. § 2, (“FAA”), a written agreement
to arbitrate disputes which arises out of a contract involving transactions in interstate
commerce “shall be valid, irrevocable, and enforceable, save upon such grounds as
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exist at law or in equity for the revocation of any contract.” Stout v. J.D. Byrider,
228 F.3d 709, 714 (6th Cir. 2000). “[A]ny doubts regarding arbitrability should be
resolved in favor of arbitration.” Fazio v. Lehman Bros., 340 F.3d 386, 392 (6th Cir.
2003) (internal citation omitted). “Despite this strong presumption in favor of
arbitration, “arbitration is a matter of contract between the parties, and one cannot
be required to submit to arbitration a dispute which it has not agreed to submit to
arbitration.” NCR Corp. v. Korala Assocs., Ltd., 512 F.3d 807, 813 (6th Cir. 2008)
(quoting Simon v. Pfizer Inc., 398 F.3d 765, 775 (6th Cir.2005)).
ANALYSIS
Plaintiffs’ First Amended Complaint alleges the following counts.
Count I: Retaliation in violation of 31 U.S.C. § 3730
Count II: Retaliation in violation of M.C.L. § 400.610c
Count III: Retaliatory discharge in violation of Michigan public policy
Count IV: Retaliatory removal of clinical privileges in violation of
Michigan public policy
Count V: False Light publication that termination was due to misconduct
Count VI: A violation of the Bullard-Plawecki Employee Right to Know
Act MCL 423.501 (as to Dr. Kaki only)
Count VII: Tortious interference with prospective economic relationships
Count VIII: Intentional Infliction of Emotional Distress
Defendants argue that many, if not all, of Plaintiffs’ claims are subject to
arbitration provisions that each doctor agreed to in their personal corporations’
contracts with Defendant VHS Harper Hutzel Hospital, Inc. On May 1, 2017, Dr.
Elder signed a Directorship Agreement with VHS on behalf of Mahir D. Elder, M.D.
P.C., his medical group. (Dkt. 11-5 Def. Ex. D). On July 5, 2016, Dr. Kaki signed a
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similar Directorship Agreement with VHS on behalf of Amir Kaki, M.D., P.C. (Dkt.
11-4 Def. Ex. C). Both directorship agreements contain detailed provisions on the
responsibilities and compensation of the directors, in addition to provisions on when
termination of the agreements is permitted. On February 1, 2016, Dr. Elder signed a
Cardio Team One On-Call Agreement with VHS on behalf of his medical group.
(Dkt. 11-6 Def. Ex. E). On February 25, 2015, Dr. Kaki signed the Cardio Team One
On-Call Agreement with VHS on behalf of his medical group. (Dkt. 11-7 Def. Ex.
F). All four of these contracts provide as follows:
Any dispute or controversy arising under, out of, or in connection with, or
in relation to this Agreement, or any amendment hereof, or the breach
hereof, shall be determined and settled by final and binding arbitration in
the county in which the Hospital is located in accordance with the
Commercial Rules of Arbitration (“Rules”) of the Judicial Arbitration and
Mediation Services (“JAMS”) before one arbitrator applying the laws of
the State.
(Dkt. 11-4 Def. Ex. C; Dkt. 11-5 Def. Ex. D; Dkt. 11-6 Def. Ex. E; Dkt. 11-7 Def.
Ex. F).
Defendants argue that most of Plaintiffs claims are subject to this mandatory
arbitration agreement and should be dismissed.
When confronted with arbitration provisions that encompass disputes
“relating to” the contract, the Sixth Circuit has held that any dispute that “must make
reference to” the contract is subject to mandatory arbitration. Fazio, 340 F.3d at 396;
see also NCR Corp., 512 F.3d at 814 (“the cornerstone of our inquiry rests upon

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whether we can resolve the instant case without reference to the agreement
containing the arbitration clause.”). This is only one stage of the inquiry, however.
When considering a motion to stay proceedings and compel arbitration
under the Act, a court has four tasks: first, it must determine whether the
parties agreed to arbitrate; second, it must determine the scope of that
agreement; third, if federal statutory claims are asserted, it must consider
whether Congress intended those claims to be nonarbitrable; and fourth, if
the court concludes that some, but not all, of the claims in the action are
subject to arbitration, it must determine whether to stay the remainder of
the proceedings pending arbitration.
Glazer v. Lehman Bros., 394 F.3d 444, 451 (6th Cir. 2005) (quoting Stout, 228 F.3d
at 714).
The first and third prongs are undisputed. The parties agreed to arbitrate at
least matters arising from or relating to the directorship agreements and Cardio Team
One on-call agreements. Federal statutory claims can certainly be subject to
mandatory arbitration clauses, Green Tree Financial Corp.-Ala. v. Randolph, 531
U.S. 79, 121 (2000), and Plaintiffs do not argue that Congress intended the FCA to
be exempt from arbitration clauses. Instead, Plaintiffs focus their objections to
arbitration on the scope of these agreements.
Plaintiffs argue that the directorship agreements need not be referenced to
resolve the case because they are irrelevant to their employment relationship with
Defendants. The four agreements are independent contractor agreements between
the doctors and VHS, and they explicitly disclaim any employment relationship.
This does not mean, however, that causes of action arising from Plaintiffs’ alleged
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employment relationship with Defendants fall outside the scope of the agreements.
To the extent that Plaintiffs argue that their duties exceeded those in the Directorship
Agreement or that those duties — according to Michigan’s economic realities test
— represented an employment relationship, they are attacking the validity of the
underlying the directorship agreements and the importance of their independent
contractor designations. The resolution of such an argument would require
referencing the independent contractor agreements. Such a case must therefore,
according to the plain language of the four agreements and Sixth Circuit precedent
on how to interpret them, be heard by an arbitrator.
Plaintiffs also maintain that the arbitration provisions are unenforceable by
and against non-signatories of the agreements. Though Michigan law provides that
“a party cannot be required to arbitrate when it is not legally or factually a party to
the agreement,” it also provides that “[n]onsignatories of arbitration agreements can
still be bound by [the] agreement pursuant to ordinary contract-related legal
principles, including incorporation by reference, assumption, agency, veilpiercing/alter ego and estoppel.” Thomas v. Right Choice Staffing Group, LLC, Case
No. 15-10055, 2015 WL 4078173 * 6 (E.D. Mich. July 6, 2015) (quoting St. Clair
Prosecutor v. AFSCME, 235 Mich. 204, 388 (Mich. 1986)).
[A] non-signatory to an arbitration agreement can compel arbitration: (1)
when the signatory to a written agreement containing an arbitration clause
must rely on the terms of the written agreement in asserting its claims
against a non-signatory; or (2) when the signatory raises allegations of
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substantially interdependent and concerted misconduct by both the nonsignatory and one or more signatories to the contract.
City of Detroit Police & Fire Ret. Sys. v. GSC CDO Fund Ltd., No. 289185, 2010
WL 1875758, at *6 (Mich. Ct. App. May 11, 2010) (citing Grigson v. Creative
Artists Agency, LLC, 210 F.3d 524, 528 (5th Cir.2000)); see also Javitch v. First
Union Sec., Inc. 315 F.3d 619, 628 (6th Cir. 2003) (holding that “a signatory may
be estopped from avoiding arbitration with a nonsignatory when the issues the
nonsignatory is seeking to resolve in arbitration are intertwined with the underlying
contract.”).
Both conditions for non-signatories compelling arbitration are present here.
First, as explained below, Plaintiffs must rely on the directorship agreements to
litigate their False Claims Act retaliation claims. Second, the misconduct which
VHS, the signatory, is alleged to have committed is the same as, or at least
substantially interdependent to, the conduct of its corporate parents and employees.
The non-signatory Defendants therefore have the same right to compel arbitration
against Plaintiffs as the signatory to the directorship agreements.
The only federal claim, Count I, which alleges retaliation in violation of the
False Claims Act, includes the termination of the directorship agreements as part of
the retaliation. The retaliation section of the First Amended Complaint specifically
lists “removal from Director positions” as an element of Defendants’ retaliation.
(Compl. ¶ 85). Count I further asks for reinstatement to previous positions as a
remedy for the doctors (¶ 108), which would entail reinstatement to the positions
outlined in the directorship agreements. Adjudicating this count would therefore
require analyzing facts arising under the directorship agreements, and the parties
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explicitly agreed that this is a task for an arbitrator. See Fazio, 340 F.3d at 396 and
NCR Corp., 512 F.3d at 814 (both holding, as explained above, that contracts that
require arbitration for conduct “relating to” their content require arbitration of
disputes whose resolution would necessitate referencing the contracts). Count I will
therefore be dismissed without prejudice, so that it can be sent to arbitration.
The remaining counts all arise from Michigan law. The Court’s only basis for
jurisdiction over them is supplemental jurisdiction. “A district court's decision
whether to exercise that jurisdiction after dismissing every claim over which it had
original jurisdiction is purely discretionary.” Carlsbad Tech., Inc. v. HIF Bio, Inc.,
556 U.S. 635, 639 (2009) (citing 28 U.S.C. § 1367(c) (“The district
courts may decline to exercise supplemental jurisdiction over a claim ... if ... the
district court has dismissed all claims over which it has original jurisdiction”)
(emphasis added)). District courts consider the following factors when determining
whether to exercise such jurisdiction.
Under Gibbs, a federal court should consider and weigh in each case, and
at every stage of the litigation, the values of judicial economy,
convenience, fairness, and comity in order to decide whether to exercise
jurisdiction over a case brought in that court involving pendent state-law
claims. When the balance of these factors indicates that a case properly
belongs in state court, as when the federal-law claims have dropped out of
the lawsuit in its early stages and only state-law claims remain, the federal
court should decline the exercise of jurisdiction by dismissing the case
without prejudice.
See Carnegie-Mellon University v. Cohill, 484 U.S. 34, 354-356 (1988) (citing
United Mine Workers of America v. Gibbs, 383 U.S. 715, 726 (1966)).
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The factors in this case clearly militate in favor of dismissal. Discovery has
not commenced, and the case is still in its earliest stages. One Plaintiff, Dr. Kaki,
already began litigating Count VI in state court, even reaching the Michigan Court
of Appeals. (See Dkt. 30-1). Perhaps most importantly, principles of comity suggest
that Michigan courts should adjudicate cases arising entirely from Michigan
statutory and common law. The Court will dismiss Counts II-VIII without prejudice
so that state courts can determine the arbitrability of the state law causes of action.
CONCLUSION
Plaintiffs are skilled professionals with years of experience in hospital
administration and access to counsel. They will be bound by the arbitration
provisions in the contracts they signed to assume their roles as directors and Cardio
Team One on-call cardiologists. These four contracts mandate arbitration for
allegations that Defendants retaliated against them by terminating their leadership
positions.
Accordingly,
IT IS ORDERED that Defendants’ Renewed Motion to Compel Arbitration
and Dismiss or Stay Litigation [25] is GRANTED IN PART AND DENIED IN
PART. Count I is dismissed without prejudice, to be arbitrated pursuant to the
contract terms. Counts II-VIII are also dismissed without prejudice, to be either
arbitrated or litigated in state court.
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IT IS FURTHER ORDERED that Defendants’ original Motion to Dismiss
and Compel Arbitration [11] is DENIED AS MOOT.
SO ORDERED.

Dated: October 9, 2019

s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge

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