Sun v. Jackson & Coker Locum Tenens LLC

Filing 19

ORDER granting 4 Motion to Compel Arbitration and Stay Proceedings, staying the action for no longer than one year, and directing counsel to make a filing on the docket upon the conclusion of arbitration. Signed by Honorable Joseph F Anderson, Jr on 05/13/2010.(bshr, )

IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF SOUTH CAROLINA C O L U M B IA DIVISION E d w a rd R. Sun, M.D., P l a in tif f , vs. J a c k s o n & Coker Locum Tenens LLC, D e f e n d a n t. ) ) ) ) ) ) ) ) ) ) C / A No.: 3:10-379-JFA

ORDER

T h i s matter comes before the court on the motion of defendant Jackson & Coker L o c u m Tenens LLC ("Jackson") to compel arbitration against plaintiff Edward R. Sun, M.D. (" S u n " ) . Dkt. No. 4. The parties have fully briefed the motion and the court heard oral a rg u m e n t at a hearing held on May 13, 2010, where the court took the motion under a d v ise m e n t. This order serves to announce the ruling of the court. I. B a c k g ro u n d S u n is a medical doctor who is board certified in diagnostic radiology and nuclear m e d ic in e . He entered into an agreement (the "Agreement") with Jackson on August 20, 2 0 0 8 , whereby Sun offered his services to Jackson's healthcare clients and Jackson promised to pay Sun a certain amount of money. Sun alleges that Jackson failed to properly submit tim e sheets to a Jackson client for whom Sun performed medical services and that the client te rm in a te d Sun without making payments Sun alleges he was entitled to receive. Sun filed s u it against Jackson in the Richland County, South Carolina court of common pleas, and J a c k so n thereafter removed the suit to federal court on the basis of diversity jurisdiction.

J a c k so n moves to compel arbitration pursuant to a provision in the Agreement providing that " [ a]n y controversy or claim arising out of or relating to the interpretation, enforcement or b re a ch of this Agreement or the relationship between the parties hereto shall be resolved by b in d in g arbitration" before the American Arbitration Association. II. D is c u ss io n J a c k so n argues that the arbitration provision of the Agreement is enforceable under e ith e r Georgia law or federal law. Sun contends that the arbitration provision is

u n e n f o rc e ab le as a matter of law because the parties failed to separately initial the arbitration p ro v isio n , or alternatively, that the cost-shifting mechanism found in the Agreement is u n c o n s c io n a b le . A. T h e Georgia Arbitration Statute

T h e issue of whether an arbitration agreement exists between the parties is a question o f state contract law. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). T h e Agreement provides that it should be governed by Georgia law; neither party challenges th is choice-of-law provision. Accordingly, the court will apply Georgia law in construing th e Agreement. Relevant here is the Georgia Arbitration Code, Ga. Code Ann. §§ 9-9-1­18, which p ro v id e s for disputes to be submitted to arbitration pursuant to a written agreement between th e parties, Ga. Code Ann. § 9-9-2(c), though also provides for a number of conditions and e x c ep tio n s to the enforcement of such an agreement. Id. § 9-9-2(c)(1)­(10). Section 9-9-

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1 ( c ) ( 9 ) provides that an arbitration agreement relating to the "terms and conditions of e m p lo ym e n t" shall not be enforceable unless the clause is separately initialed by all s ig n a to rie s at the time of execution of the contract. The Agreement's arbitration clause is not se p a ra tely initialed. However, the question remains as to whether the Agreement relates to th e "terms and conditions of employment." The courts of Georgia have had occasion to interpret the section 9-9-1(c)(9) exception a handful of times. In Columbus Anesthesia Group, P.C. v. Kutzner, the Georgia Court of A p p e a ls considered an arbitration provision in a contract setting forth the terms and c o n d itio n s of Dr. Kutzner's membership in Columbus Anesthesia Group ("CAG"). 459 S .E .2 d 422 (Ga. App. 1995). The contract at issue in Kutzner specified Dr. Kutzner's b e n e fits as an equity member, indicated an intent to form another corporation, established the h o u rs he was to be on call, and allocated responsibilities between Dr. Kutzner and the other m e m b e rs of CAG. Dr. Kutzner filed suit and CAG moved to compel arbitration on the basis o f section 9-9-1 and the Federal Arbitration Act ("FAA"), 9 U.S.C. § 2. The Georgia Court o f Appeals found that because the contract set forth his interest in CAG, base salary, benefits, a n d hours to be devoted to CAG, the contract related to the terms of his employment and the in itia lin g requirement of section 9-9-1(c)(9) applied. The seemingly broad reading of section 9 - 9 - 1 (c ) (9 ) in Kutzner, however, is reined back in Joja Partners, LLC v. Abrams Properties, In c ., 585 S.E.2d 168, 172 (Ga. App. 2003). In Joja, the Georgia Court of Appeals considered an agreement that required one party

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to provide certain services relating to the administration, management, supervision, leasing, a n d disposition of the other party's real estate holdings. The contract explicitly indicated that th e relationship between the parties was that of independent contractors. The analysis p o rtio n of the Jojo opinion commences with a recognition that the Georgia Arbitration Code m u s t be strictly construed, Jojo, 585 S.E.2d at 170­71, and noted that the contract at issue w a s not an employment agreement, but rather an asset management contract between in d e p e n d en t contractors. Id. at 171. The court then annunciated a more or less categorical te st for section 9-9-1(c)(9), whereby it stated that construing "terms and conditions of e m p lo ym e n t" to include a contract between independent contractors "would violate our duty o f strict construction relative to the Georgia Arbitration Code." Id. at 171­72. Jojo stands f o r the proposition that where "the contract of employment clearly denominates the other p a rty as an independent contractor, that relationship is presumed to be true unless the e v id e n c e shows that the employer assumed . . . control." Id. at 171. Accordingly, absent a s h o w i n g of control, an independent contractor cannot invoke the initialing requirement of s e c tio n 9-9-1(c)(9) as a defense to arbitration. T h e Agreement explicitly states that the relationship between the parties is that of in d e p e n d en t contractors and not employer and employee. From reviewing the complaint and th e agreement, Jackson does not appear to be employing Sun, but rather finding employment f o r him in exchange for consideration. Still, several of the Agreement provisions appear to a f f e c t the terms and conditions of the employment Jackson aspires to find for Sun. Namely,

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th e Agreement provides for travel arrangements; assistance in securing licences, insurance, a n d hospital privileges; and contains a two-year exclusivity arrangement that controls how S u n may go about seeking employment. However, where the Agreement defines the re latio n sh ip between Sun and Jackson as independent contractors, Joja requires the court to d e te rm in e whether Sun has made a showing of Jackson's control. Sun has made no such s h o w in g . The court finds that the Agreement evidences the parties' intent to arbitrate the m a tte r, that section 9-9-2(c)(9) is inapplicable, and that Georgia law requires the case be su b m itte d to arbitration. Because the court relies on Georgia law for its ruling, it will refrain f ro m considering the applicability of the FAA. B. U n c o n s c i o n a b i l it y

S un argues that the cost-shifting provision in the Agreement renders it unconscionable a n d seeks to have the Agreement declared invalid. In the alternative, Sun seeks to sever the o f f e n d in g provision. Georgia sets a high bar for establishing unconscionability. Its view is s e t for below: P e o p le should be entitled to contract on their own terms without the in d u l g e n c e of paternalism by courts in the alleviation of one side or another f ro m the effects of a bad bargain. Also, they should be permitted to enter into c o n tra c ts that actually may be unreasonable or which may lead to hardship on o n e side. It is only where it turns out that one side or the other is to be p e n a liz e d by the enforcement of the terms of a contract so unconscionable that n o decent, fairminded person would view the ensuing result without being p o ss e ss e d of a profound sense of injustice, that equity will deny the use of its g o o d offices in the enforcement of such unconscionability. N E C Tech. Inc. v. Nelson, 478 S.E.2d 769, 773 (Ga. 1996) (quoting Fotomat Corp. of Fla.

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v . Chanda, 464 So.2d 626, 630 (Fla. Dist. Ct. App. 1985)). To "tip the scales in favor of u n c o n sc io n a b ility," Georgia law requires the circumstances to present "a certain quantum of p ro c e d u ra l plus a certain quantum of substantive unconscionability." NEC, 478 S.E.2d at 7 7 3 n.6; White v. Wachovia Bank, N.A., 563 F. Supp. 2d 1358, 1370 (N.D. Ga. 2008). F a c to rs to consider in determining procedural unconscionability include "the age, education, intelligen ce , business acumen and experience of the parties, their relative bargaining power, th e conspicuousness and comprehensibility of the contract language, the oppressiveness of th e terms, and the presence or absence of a meaningful choice." Id. at 771. "When con sidering substantive unconscionability, the court considers the commercial reasonableness o f the contract terms, the purpose and effect of the terms, the allocation of risks between the p a rtie s, and whether the contract contravenes public policy." White, 563 F. Supp. 2d at 1370. A ls o of note, in Saturna v. Bickley Const. Co., the Georgia Court of Appeals found that lack o f mutuality of remedy does not, on its own, render an arbitration provision unconscionable a s a matter of law. 555 S.E.2d 825, 827 (Ga. App. 2001). Here, the Agreement provides that Sun will be responsible for "reasonable expenses, in c lu d in g attorneys' fees," should Jackson prevail at arbitration, though sets forth no r e c ip r o c a l obligation on the part of Jackson should Sun prevail. Thus, the court must d e ter m in e whether the cost-shifting mechanism in the Agreement would cause a decent, f a irm in d e d person to "possess a profound sense of injustice from the enforcement" of the c o st-s h if tin g mechanism. NEC, 478 S.E.2d at 775. The court finds that it does not.

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N o n m u tual cost-shifting provisions are onerous contract terms to be sure, however, they are n o t per se unconscionable. See Realty Lenders, Inc. v. Levine, 649 S.E.2d 333, 337 (Ga. A p p . 2007) (indicating in dicta that nonmutual fee shifting is not unconscionable). The p a rtie s enjoy the freedom of contract and should be bound by their mutually agreed-upon te rm s absent some quantum of procedural unconscionability. H o w e v e r, Sun's procedural unconscionability argument fares no better than his s u b s ta n tiv e one. Sun is a highly educated and sophisticated individual. The cost-shifting and a rb itra tio n provisions are readily intelligible and appear immediately above Sun's signature. A ls o , in the same vein as the procedural argument discussed above, having the loser pay c o s t s is not violative of public policy where agreed to in advance by contract. Because G e o rg ia law allows for lack of mutuality of remedy, and in recognition of the sophistication o f the parties, the court declines to find the cost-shifting mechanism unconscionable. III. C o n c lu s io n B a se d on the foregoing, the court hereby grants Jackson's motion to compel a rb itra tio n pursuant to the Agreement, as written. Dkt. No. 4. The case is hereby stayed for a period of one year and no longer.1 The parties shall make a filing on the docket

im m e d ia te ly upon the conclusion of arbitration.

1. This court has recently endured several cases where the parties went to arbitration and then failed to secure an arbitration date for more than one year. The court finds this unacceptable. 7

IT IS SO ORDERED.

M ay 13, 2010 C o lu m b ia , South Carolina

J o s e p h F. Anderson, Jr. U n ite d States District Judge

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