Visiting Nurse Ass’n of Fla., Inc. v. Jupiter Med. Ctr., Inc. (Summary)

ARBITRATION

Visiting Nurse Ass’n of Fla., Inc. v. Jupiter Med. Ctr., Inc.
No. SC11-2468 (Fla. July 10, 2014)

The Supreme Court of Florida held that it is not necessary to determine the legality of a contract in order to enforce an arbitral award based on the contract. The arbitral award in question arose out of an arrangement between a Home Health Agency and a Hospital. Under their arrangement, the Home Health Agency agreed to purchase the Hospital’s in-house home health agency in exchange for the implementation of certain discharge planning procedures. The procedures applied specifically to patients requiring home health services post-discharge; in these circumstances, the Hospital was required to provide a predetermined list of available home health services in the area. If a patient did not express a particular preference for any of the agencies on the list, the Hospital would inform the patient of its relationship with the Home Health Agency.

After observing a decline in Medicare referrals, the Home Health Agency guessed that the Hospital was not complying with the agreement and was instead utilizing a rotation system for home health referrals. Although the Hospital initially denied that there was a rotation system in place, it was later confirmed, by a former discharge planner, that there was such a system.

The Home Health Agency responded by giving notice that it would not renew its lease with the Hospital for certain rental property. The Hospital subsequently gave notice that the Home Health Agency would no longer be permitted to lease space in its discharge planning department. The Hospital also notified the Home Health Agency that it would no longer notify patients of the Hospital’s relationship with the Home Health Agency.

When the Home Health Agency stopped making rent payments, the Hospital sued. Because their contract included an arbitration clause, the dispute was referred to an arbitration panel for resolution. The arbitration panel found that the Hospital had breached the contract by failing to make its staff aware of the discharge planning procedures, by terminating the office space lease agreement, and by announcing its intention to cease complying with the discharge planning procedures. The arbitration panel awarded the Home Health Agency $1.2 million in damages and an additional amount in interest, fees, and costs.

The Hospital tried to reopen the arbitration proceedings to allow testimony concerning the illegality of the panel’s interpretation of the contract, that as construed the contract would violate the state and federal anti-kickback statutes. The arbitration panel denied the Hospital’s motion and the Hospital then filed a motion to vacate the arbitration award in federal court on the same grounds. The Hospital also filed a motion to vacate the arbitration award in state court claiming that the panel had mistakenly construed the parties’ contract in a manner contrary to law and that the panel had exceeded its authority. Specifically, the Hospital argued that state and federal laws would prohibit it from entering agreements to “make, influence, and steer future patient referrals” to the Home Health Agency. Since the contract itself was unlawful, the Hospital argued that courts should refuse to enforce any arbitral award based upon it.

The Florida Supreme Court disagreed with the Hospital. It explained that when parties bargain for an arbitration clause, they consent to substitute a “tribunal of their own choosing” for the one provided and established by law. “[C]ourts cannot review the claim that an arbitrator’s construction of a contract renders it illegal.”