Schreiber v. Tenet Healthcare Corporation et al
Filing
28
ORDER granting in part and denying in part 15 Motion to Dismiss and Compel Arbitration. Signed by District Judge Arthur J. Tarnow. (MLan)
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DR. THEODORE SCHREIBER, M.D.,
Case No. 19-10965
Plaintiff,
v.
SENIOR U.S. DISTRICT JUDGE
ARTHUR J. TARNOW
TENET HEALTHCARE CORPORATION,
ET AL.,
U.S. MAGISTRATE JUDGE
STEPHANIE DAWKINS DAVIS
Defendants.
/
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’
MOTION TO DISMISS AND COMPEL ARBITRATION [15]
Plaintiff, a cardiologist formerly employed by Detroit Medical Center, alleges
that Defendants engaged in retaliation within the meaning of the federal False Claims
Act (“FCA”) when they took adverse employment actions against him. He also alleges
that he was misclassified as an independent contractor when he should have been paid
as an employee, in violation of the federal Fair Labor Standards Act (“FLSA”). He
further pleads several 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 Right to Know Act,
tortious interference with contractual expectations, intentional infliction of emotional
distress, and civil conspiracy.
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Defendants argue that these claims are all subject to arbitration provisions that
Dr. Schreiber agreed to in his personal corporation’s contract with Defendant VHS
Harper Hutzel Hospital, Inc. (“VHS”) on November 8, 2017 and December 11, 2017.
The Court will grant this motion in part and compel arbitration on the two causes of
action arising under federal law, Count I and VIII, but it will decline to exercise
supplemental jurisdiction over the remaining state law causes of action.1
FACTUAL BACKGROUND
Dr. Schreiber is a “world-renowned interventional cardiologist” who was
recruited and hired by the Detroit Medical Center (“DMC”) in 2004. (Compl. ¶¶ 1315). He was employed as the President of the DMC Cardiovascular Institute and
Specialist-in-Chief of Cardiovascular Medicine at the DMC. (Id. at ¶ 16). Dr. Schreiber
also founded Cardio Team One (“CTO”). CTO began operating in 2008 with Dr.
Schreiber as Director, and it entailed the 24/7 presence of a medical team available to
perform emergency balloon angioplasty and stenting. (Id. at ¶¶ 23-32).
In 2009, Dr. Schreiber signed a Physician Employment Agreement as the
President of the DMC Cardiovascular Institute. That agreement was to be effective on
June 1, 2009 and terminate on April 30, 2014. (Dkt. 26-1, Pl. Ex. L). Dr. Schreiber also
signed a Physician Independent Contractor Agreement with DMC to be effective from
Also before the Court is a companion case brought by Dr. Amir Kaki and Dr. Mahir
Elder, both colleagues of Plaintiff in similar, but by no means identical, situations. See
Amir Kaki, M.D., et al. v. Tenet Healthcare Corporation, et al., Case No. 2:19-cv10863-AJT-DRG. That case has also been dismissed without prejudice.
1
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May 1, 2010 to April 30, 2012. (Dkt. 26-1, Pl. Ex. M). DMC was sold to VHS in 2010.
(Compl. at ¶ 42). In 2011, VHS signed two Physician Independent Contract agreements
with Dr. Schreiber, one to be effective from December 1, 2011 to November 30, 2012,
and the other to be effective from July 28, 2011 to December 31, 2013. (Dkt. 26-1, Pl.
Ex. J & K). VHS was sold to Tenet Healthcare Corporation (“Tenet”) in 2013. (Compl.
at ¶ 43). In 2014, DMC opened its Heart Hospital, which was developed with Dr.
Schreiber’s assistance. (Id. at ¶¶ 35-38).
The Complaint alleges that from the beginning Tenet sacrificed patient care for
profit-making. Plaintiff observes that after the takeover Tenet made significant
budgetary cuts to DMC, including depriving the Cath lab and intensive care unit of
sufficient personnel. (Id. at ¶¶ 54-55). Plaintiff further alleges that doctors came to him
to voice their concerns that these aggressive cuts were diminishing standards of care.
Dr. Schreiber, along with Dr. Kaki and Dr. Elder, brought these complaints to the
attention of hospital executives, including Defendants Tedeschi and Steiner. (Id. at ¶¶
56-59). He also alleges that Tenet was foisting unnecessary and dangerous medical
procedures on patients to increase Medicare and Medicaid income, in addition to other
misconduct. (Id. at ¶ 62).
At the end of 2017, allegedly due to his outspoken complaints to hospital
administrators, Dr. Schreiber was stripped of his positions as President and Specialistin-Chief and was demoted to the positions of Executive Director of the Cardiology
Service Line and Program Director of the Interventional Cardiology Fellowship. (Id. at
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¶ 79). His new positions entailed substantially less authority over budget allocation and
the administration of the Heart Hospital. (Id. at ¶ 80). The contracts for these positions
contained the arbitration provisions that are the subject of Defendants’ motion.
In May of 2018, Tenet and DMC executives instructed various of their staff to
produce “all Harper-Hutzel Cardiology quality & peer review documents from May 1,
2015 to present” for review by outside counsel from the law firm Latham & Watkins.
(Id. at ¶ 88). Dr. Schreiber objected to this process as violative of the sanctity of the
peer review process and thereby dangerous, and Defendant Tedeschi informed Dr.
Schreiber that DMC and Tenet executives were very upset with his objections. (Id. at
¶¶ 89-91). Latham & Watkins began their review in August of 2018. (Id. at ¶ 92). Dr.
Schreiber met with Latham & Watkins attorneys for an interview on September 20,
2018. (Id. at ¶ 97). The interviews led to the production of a report, which, at the time
of the complaint, had not been provided to Dr. Schreiber. (Id. at ¶¶ 98-99).
In an October 1, 2018 letter, Defendant Steiner informed Dr. Schreiber that he
was terminated from his leadership positions due to an investigation that resulted in a
determination that he had violated Tenet Standards of Conduct. (Id. at ¶ 106). That same
day, Defendants emailed more than 5,000 hospital employees that Dr. Schreiber, along
with several other cardiologists, had been terminated for unspecified violations of the
Tenet Standards of Conduct. (Id. at ¶ 111). Defendants’ conduct also forced him to
resign from the medical staff at the DMC. (Id. at ¶ 102).
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PROCEDURAL HISTORY
Plaintiff filed his complaint on April 1, 2019. [Dkt. # 1]. On May 7, 2019
Defendants filed a Motion to Dismiss and Compel Arbitration [15]. That motion was
set for a hearing on July 25, 2019 [22], but, following a status conference on July 17,
2019, the Court adjourned the hearing to give the parties time to conduct limited
discovery into whether or not there were other contracts between Defendants and
Plaintiff. Plaintiff filed his supplemental brief [26] on September 12, 2019. Defendants
filed their Response [27] on September 26, 2019. The Court held a hearing on
Defendants’ motion on October 3, 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 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)).
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ANALYSIS
Plaintiff alleges the following causes of action.
Count I: Violation of the Retaliation Provision of the False Claims Act
Count II: Violation of the Michigan Medicaid False Claims Act
Count III: Retaliation in Violation of Public Policy
Count IV: Defamation
Count V: False Light
Count VI: Tortious Interference with Business Relationship
Count VII: Intentional Infliction of Emotional Distress
Count VIII: Violation of the Fair Labor Standards Act
Count IX: Violation of the Bullard-Plawecki Right to Know Act
Count X: Civil Conspiracy
The Program Director Agreement and the Executive Director Agreement both
contained the following language:
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. 15-3, Ex. B pg. 7; Dkt. 15-4, Ex. C pg. 7).
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 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.
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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 prong is undisputed. The parties agreed to arbitrate at least matters
arising from or relating to the 2017 directorship agreements. The scope of these
agreements is disputed, however, as is whether Congress intended Plaintiff’s FLSA
claim to be nonarbitrable.
Scope
The operative question is whether the disputes raised in the complaint arise
“under, out of, or in connection with, or in relation to” the two Directorship
Agreements. As per NCR Corp and Fazio, this inquiry requires the Court to ask if the
present disputes can be resolved without referencing the content of the agreements
containing the arbitration clauses. At least the FCA and FLSA disputes cannot.
Plaintiff’s FCA retaliation claim incorporates allegations that Dr. Schreiber was
demoted from his positions as the President and Specialist-in-Chief of DMC Heart
Hospital to the directorship positions outlined in the 2017 agreements. (Compl. ¶¶ 7980). It hinges on allegations that Defendants were retaliating against Dr. Schreiber
when, the following year, they forced him to resign as Executive Director of the
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Cardiology Service Line and terminated him as Program Director. (Id. at ¶¶ 103, 105).
Plaintiff contends that Defendants’ stated reasons for disciplining Dr. Schreiber —
alleged violations of Tenets Standards of Conduct as referenced in the directorship
agreements — were thin pretexts. (Id. at ¶ 96). The factual narrative underlying the
FCA claim therefore directly relates to the 2017 directorship agreements, which contain
the arbitration clauses. Though Plaintiff is no doubt correct that his fourteen-year
relationship with DMC was vastly more expansive and complicated than the duties and
responsibilities outlined in these two agreements, the retaliation at the heart of his FCA
claim arises directly from the creation and termination of these agreements. Count I
therefore falls within the scope of the parties’ agreement to arbitrate.
Plaintiff’s FLSA claim is also within the scope of the 2017 directorship
agreements. Plaintiff relies on U.S. ex rel. Paige v. BAE Systems, 566 Fed. App’x 500
(6th Cir. 2014). The Sixth Circuit in that case determined that an employment
agreement mandating arbitration for disputes “arising from” the agreement did not
mandate the arbitration of employees’ qui tam action alleging fraud under the FCA. Id.
Critically though, that case distinguished NCR Corps on the grounds that the arbitration
clause signed by the relators in BAE Systems “explicitly limits the scope of the clause
to the disputes arising ‘under the terms of this agreement’ and does not include claims
‘related’ to the agreement or that arise out of the relationship between the parties.” Id.
at 504. The arbitration clause was therefore “narrower than those cases addressing
broadly-worded arbitration clauses.” Id.
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The arbitration clauses in this case do use the terms “in relation to.” This term,
in 2017, had the established legal effect of creating a broad arbitration agreement. It
therefore provided Plaintiff with “clear notice” of an agreement to arbitrate disputes
whose resolution would require referencing the agreements. Rembert v. Ryan’s Family
Steak Houses, Inc. 596 N.W.2d 208, 228 (Mich. Ct. App. 1999).
Plaintiff also argues that he had an independent employment relationship with
Defendants that was explicitly disclaimed by his Directorship Agreement, which
specified that Dr. Schreiber’s medical group was an independent contractor. In order to
even undertake the Michigan economic realities test to determine if Plaintiff was
misclassified as an independent contractor, however, a court would need to evaluate
Plaintiff’s job responsibilities, both in practice and as outlined in the directorship
agreements. The directorship agreements provide detailed lists of Dr. Schreiber’s
duties, compensation, and responsibilities. (Dkt. 15-3, Ex. A; Dkt. 15-4, Ex. A).
Even after limited discovery, Plaintiff was not able to present any employment
contract in effect at the time of his alleged demotion and termination. (See Dkt. 26-1).
The directorship agreements would therefore provide the only contractual evidence of
Dr. Schreiber’s relationship with Defendants, and references to it would be inevitable
in adjudicating a FLSA misclassification case. More to the point, by arguing that he
was forced into the directorship agreements (while stopping short of alleging duress),
and that those agreements misrepresented his relationship to his employer, Dr.
Schreiber is directly attacking the validity of the directorship agreements. Such an
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argument certainly arises “under, out of, or in connection with, or in relation to” the
agreements. Count VIII therefore falls within the scope of the parties’ agreement to
arbitrate.
Arbitrability
The Supreme Court has “recognized that federal statutory claims can be
appropriately resolved through arbitration, and [it has] enforced agreements to arbitrate
that involve such claims.” Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79,
89 (2000). “[E]ven claims arising under a statute designed to further important social
policies may be arbitrated “so long as the prospective litigant effectively may vindicate
[his or her] statutory cause of action in the arbitral forum.” Id. at 90 (quoting Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991)).
Plaintiff argues that his FLSA claims are nonarbitrable because the FLSA
requires the award of attorney fees to a prevailing plaintiff, while JAMS arbitration
rules specify that costs be split. JAMS Rule 4, however, specifies that where such rules
conflict with the applicable law, the provision of law controls. (Dkt. 19-5, Ex. K).
Plaintiff’s rights to attorney fees under FLSA can thus be vindicated in arbitration. See
Wilks v. Pep Boys, 241 F.Supp.2d 860, 866-67 (M.D. Tenn. 2003) (holding that similar
JAMS and AAA rules meant that an arbitrator would be required to award attorney fees
to a prevailing FLSA plaintiff).
Plaintiff furthers argues that the arbitration clauses are contrary to public policy
because they allow Defendants to keep evidence of their alleged wrongdoing out of the
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public forum. The FAA provides that agreements to arbitrate “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. Interpreting the final savings clause of § 2,
the Supreme Court has observed that the FAA permits the invalidation of agreements
to arbitrate “by generally applicable contract defenses, such as fraud, duress, or
unconscionability,’ but not by defenses that apply only to arbitration or that derive their
meaning from the fact that an agreement to arbitrate is at issue.” AT&T Mobility LLC
v. Concepcion, 563 U.S. 333, 339 (2011) (quoting Doctor’s Associates, Inc. v.
Casarotto, 517 U.S. 681, 687 (1996). Plaintiff’s position, that arbitration is against
public policy because it is private, is thus foreclosed by the FAA, which itself reflects
a “liberal federal policy favoring arbitration.” Id. (quoting Moses H. Cone Mem’l Hosp.
v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)).
Counts I and VIII, alleging violations of provisions of the False Claims Act and
the Fair Labor Standards Act, must therefore be arbitrated.
Supplemental Jurisdiction
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
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all claims over which it has original jurisdiction”)). 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)).
The factors in this case clearly militate in favor of dismissal. Discovery has not
commenced, and the case is still in its earliest stages. Principles of comity suggest that
Michigan courts should adjudicate cases arising entirely from Michigan statutory and
common law. The Court will dismiss Counts II, III, IV, V, VI, VII, IX and X without
prejudice so that state courts can determine the arbitrability of the state law causes of
action.
CONCLUSION
Dr. Schreiber is a skilled cardiologist and a seasoned hospital administrator with
access to counsel who agreed to arbitrate all disputes “arising under, out of, or in
connection with, or in relation to” the two 2017 directorship agreements. The FAA
provides that such agreements shall be enforceable, and Plaintiff’s collateral attacks on
the agreements are unavailing. The Court will therefore compel arbitration on the two
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federal claims that form the basis of its jurisdiction, Counts I and VIII, and dismiss the
remaining claims so that they can be adjudicated by Michigan courts.
Accordingly,
IT IS ORDERED that Defendants’ Motion to Dismiss and Compel Arbitration
[15] is GRANTED. The case is dismissed without prejudice.
SO ORDERED.
Dated: October 9, 2019
s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge
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