THE CORPORATE PRACTICE OF MEDICINE DOCTRINE

The Corporate Practice of Medicine Doctrine (the “CPMD”) prohibits non-physicians from the practice of medicine. The CPMD is manifested in three ways: (1) a non-licensed person or corporation cannot employ a physician to practice medicine; (2) entities that provide health care services cannot be owned or controlled by non-licensed persons or general corporations; and (3) a licensed professional may not share a professional fee with a non-licensed person or entity, because such an act is considered to be assisting an unlicensed person to practice medicine. Nicole Huberfeld, Be Not Afraid of Change: Time to Eliminate the Corporate Practice of Medicine Doctrine, 14 Health Matrix 243, 244 (2004). Its origin was based on public policy arguments for providing safe and effective medical services to patients.

During the nineteenth century, medical practice was not necessarily inferior, but it was “insecure and ambiguous.” Paul Starr, The Social Transformation of American Medicine: The rise of a sovereign profession and the making of a vast industry 81 (Basic Books, Inc., Publishers 1982); see id. at 85 (“The status of the medical profession, though insecure, was probably higher than its objective economic situation might suggest. . . . On the one hand, physicians felt a need to maintain an image of a cultivated, respectable, learned profession; on the other, the reality was that many doctors had little education and often, when starting out in practice, could barely support themselves.”). Physicians faced immense competition not only with themselves, but also with “’irregulars’—quacks and healing sectarians” who did not obtain a traditional medical education. Sara Mars, The Corporate Practice of Medicine: A Call For Action, 7 Health Matrix 241, 247 (1997).

The corporate involvement in medicine emerged in two forms: (1) “contract practice,” where corporations employed physicians to provide medical services to their employees, and (2) “corporate practice,” where physicians’ services were marketed to the public by corporations which either employed physicians or contracted separately for their services. Adam M. Freiman, The Abandonment of the Antiquated Corporate Practice of Medicine Doctrine: Injecting a Dose of Efficiency into the Modern Health Care Environment, 47 Emory L.J. 697, 701 (1998). The corporate involvement of medicine alarmed the leaders of the medical profession who maintained that such involvement would result in a lower quality of care to patients. Id. at 702. These “commercial intermediaries,” focused mainly on profit share and contracted with doctors to give treatment at low rates, which usually meant lower-quality medical services. Starr, supra, at 199. The American Medical Association (“AMA”) spoke out by adopting a statement urging physicians to resist the further expansion of contract and corporate practice. Freiman, supra, at 702. Over time, however, a conflicting efficiency rationale due to the rise of health care costs has been relied upon to chip away at the doctrine. The result is that the application of the CPMD varies considerably across the states with no clear indication of the doctrine’s future.

Various measures of health benefits like health promotion, rescue and relieving patient suffering are all essential features of health care. Einer R. Elhauge, Can Health Law Become A Coherent Field of Law?, 41 Wake Forest L. Rev. 365, 381 (2006). Therefore, the inception of the CPMD is based on valid grounds. However, the health care industry has changed significantly since the nineteenth century, particularly in regards to the need to contain the costs of health care services. These other essential features, costs and tradeoffs, raised by health care explain why the current scope of the CPMD is assorted. There must be a balance of both competing interests. States should try and balance both the economic and patient-centered goals when applying the CPMD and apply the doctrine in a consistent manner.

Heart Balm Actions: Does it protect the sanctity of marriage or is it destructive to family life?

I first learned of Heart Balm Actions while studying for the New York Bar exam. These antiquated laws, which are no longer valid in New York, date back to when a woman was considered property. There were five possible causes of action: (1) “breach of promise to marry,” a tort action for when an engagement was broken; (2) “seduction of an unmarried female,” an action belonging to an unmarried woman’s father against the seducer; (3) “criminal conversation,” a tort action in which the innocent spouse would sue the paramour for committing adultery with the other spouse; (4) “alienation of affections,” an action against a third-party interloper (sometimes a mother-in-law) who turns one spouse against the other spouse; and (5) “jactitation of marriage,” an action against someone who makes a widespread dissemination that the complainant is married to someone he or she is not married to.

While abolished in New York, there are still seven states that allow the suit of alienation of affection: Hawaii, Illinois, Mississippi, New Mexico, North Carolina, South Dakota and Utah. There has been recent focus on the laws of alienation of affection and criminal conversation because of the publication of extramarital affairs of public figures, such as Tiger Woods. See Wayne Drash, Beware cheaters: Your lover’s spouse can sue you (2009), http://www.cnn.com/2009/LIVING/12/08/cheating.spouses.lawsuits/index.html. Proponents of this law say that the threat of such legal action helps protect the sanctity of marriage. However, does it? Even the use of the word “balm,” defined as “a soothing restorative agency” suggests a different notion. http://www.merriam-webster.com/dictionary/BALM. Heart Balm actions do not protect the sanctity of marriage and/or deter extramarital relationships; rather, they simply offer the jilted spouse with a vengeful tool.

The tort of alienation of affection originated in the Teutonic tribes. Bruce V. Nguyen, Hey, That’s My Wife! – The Tort of Alienation of Affection in Missouri, 68 Mo. L. Rev. 241, 243 (2003). In their culture, a wronged husband could kill his wife’s lover if he found the lover and his wife engaging in adulterous acts. Id. As time progressed, however, such extreme measures were no longer allowed. Id. Instead, the husband could extract a financial penalty from the lover, which would be used as a means to purchase a new spouse. Id. As successors to the Teutonic tradition, the Anglo-Saxons provided a cause of action for tortious interference with the marital relationship. Id. at 244. The basis was that the wife was considered to be the husband’s property, the loss of which permitted the husband to seek compensatory damages. Id. Eventually, English common law created what are now known as the modern-day torts of criminal conversation and alienation of affection.

Over the course of the second half of the twentieth century, however, most states have eliminated the tort of alienation of affection because the tort failed to preserve marriages and merely “invite abuse.” Id. at 248 (Wyman v. Wallace, 615 P.2d 452, 455 (Wash, 1980) ( holding that the tort failed to preserve marriages, the court system could not effectively police out-of-court settlements, the tort promoted blackmail, no standards for assessing damages existed, and successful prosecution of the suit amounted to little more than the sale of the spouse’s affections); see also Fundermann v. Mickelson, 304 N.W.2d 790, 791 (Iowa 1981) (stating that the tort failed to preserve the family unit and that no party could recover for the loss of affection from the other spouse)); Hoye v. Hoye, 824 S.W.2d 422, 427 (Ky.1992). Plaintiffs are often able to extract generous settlements by threatening to bring the defendant’s reputation into question. Nguyen, supra, at 248. Such settlements amount to legally sanctioned blackmail. See id.

Contracts, Fraud & the Arbitration Clause

Unfortunately, it is not uncommon to find idiosyncratic laws within the American legal system. For example, the claim for fraudulent inducement in a contract dispute and the effect of that assertion depending on whether or not there is an arbitration clause.

An arbitration clause in a contract requires the parties to resolve any disputes through an arbitrator instead of a judge. The arbitration process is often seen as favorable because it is “speedy and not subject to delay and obstruction in the courts.” Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 (1967). The federal government expressed its support of arbitration clauses by passing the Federal Arbitration Act (“FAA”), which makes the arbitration process binding and parties relinquish their right to challenge a final decision by instituting a court action. Therefore, in a contract dispute, if the contract has an arbitration clause, the dispute must be heard before an arbitrator, unless the arbitration clause is specifically challenged.

A claim for fraud in the inducement basically states that the contract cannot be enforced as written because it was agreed to based on fraudulent claims by the party trying to enforce the contract. Fraud is a basis for voiding a contract either in its entirety or specific terms because there was no “meeting of the minds.” Such mutual consent is a necessary element to the formation of a valid contract.

While a finding of fraud in the inducement will usually void an entire contract, if there is an arbitration clause, the federal court may proceed to adjudicate it only if the claim of fraud is in the inducement of the arbitration clause itself. Id. The Prima Paint Supreme Court found that the statutory language of the FAA did not permit the federal court to consider claims of fraud in the inducement of the contract generally. Id. Therefore, claims of fraud in the inducement of the entire agreement must be submitted to the arbitrator for resolution unless expressly excluded by the arbitration provision. However, if a party claims fraud in the inducement of the arbitration clause itself, this would avoid the enforceability of the arbitration clause.

In Justice Black’s dissenting opinion in Prima Paint, where the plaintiff contended that it would not have executed any contract, including the arbitration clause, if it were not for the fraudulent representations of the defendant, Justice Black recognized the faulty logic of the FAA interpretation. Id. at 415 (Black, J., dissenting). Justice Black noted that the two special values of arbitration – (1) expertise of an arbitrator and (2) the speed of the arbitration process – would not be served where a contract is sought to be rescinded on the ground of fraud. Id.

“On the one hand, courts have far more expertise in resolving legal issues which go to the validity of the contract than do arbitrators. On the other hand, where a party seeks to rescind a contract and his allegation of fraud in the inducement is true, an arbitrator’s speedy remedy of this wrong should never result in resumption of performance under the contract. And if the contract were not procured by fraud, the court, under the summary trial procedures provided by the Act, may determine with little delay that arbitration must proceed.” Id. at 416 (Black, J., dissenting).

The legal distinction of claiming fraud in the inducement of the contract generally versus fraud in the inducement of the arbitration clause specifically is idiosyncratic. When one is fraudulently induced into an agreement, which includes an arbitration clause, then the case should be heard at trial because fraudulent inducement of the entire agreement includes fraudulent inducement of the arbitration clause as well. A party forced into arbitration is bound by the arbitrator's final decision, has no right to a jury, and cannot appeal the decision in a subsequent court hearing. There should not be a requirement that a separate and express claim be made of fraud in the arbitration clause itself for that matter to be heard before a judge.

Introducing Guest Blawger Jennifer Lee

I am happy to announce Jennifer Lee will be writing here for the next month as a Guest Blawger. Jenn has only just graduated law school and has successfully completed her licensing exams; I’m pleased she’s agreed to contribute to the blawg.

Jenn previously worked at law firms Jenner Block and Thompson Coburn, working on litigation and research and writing projects. She has also worked with Bloomberg LLP on their "BLAW" project, and while in law school she researched and drafted legislation for the City Government of St. Louis. Currently Jenn interns with two judges in the Hackensack County Courthouse in New Jersey.

Jenn completed undergraduate work at the University of Michigan, taking second place at the Delta Epsilon Chi ("DECA") State Conference International Business Division competition. She completed her legal studies at the Saint Louis University School of Law, receiving a Certificate in Health Law. Jenn has a number of professional accolades from her legal studies, including Editor of the Saint Louis University Law Journal, Teacher’s Assistant and participation in Moot Court, as well as Vice President of the Asian American Law Student Association ("AALSA").

Jenn lives in New Jersey and is licensed to practice in the states of New Jersey and New York. Welcome Jenn! I hope you have a great time while here – I am looking forward to your writing!