Selma Med. Ctr., Inc. v. Fontenot
In Selma Med. Ctr., Inc. v. Fontenot, 824 So. 2d 668 (Ala. 2001) the contract at issue (1) required two physicians to relocate their medical practices from one state to another; (2) provided guaranteed gross receipts or income for a certain period of time after relocation, with the stipulation that if the net collectible revenue exceeded $ 500,000 during that period, the physicians would repay the hospital the difference; (3) provided for payment of certain sums to assist in relocation expenses and start-up costs; and (4) contained a provision requiring arbitration in accordance with the rules of the American Arbitration Association.
A dispute arose when the hospital claimed, but the physicians disputed, that the physicians owed the hospital excess revenue collected during the guarantee period.
Concordant with Thornton, the Alabama physicians challenged the arbitration agreement and attempted to have the court disregard the clear interstate aspect of the agreement and concentrate solely on medical services to be provided in-state.
South Carolina and Alabama each have a statute that places certain requirements on arbitration agreements if they are to be enforced.
If the FAA applied, Alabama's statutory requirement for arbitration agreements would be preempted.
In determining that the arbitration provisions contained within the physician recruitment agreements were governed by the FAA, the Selma court cited the three categories of activity that Congress can regulate pursuant to the Commerce Clause, namely: "(1) the use of the channels of interstate commerce; (2) the instrumentalities of interstate commerce or persons or things in interstate commerce; and (3) those activities having a substantial effect on interstate commerce." Id. at 674.
The court concluded that, in the context of the physician recruitment agreement at issue in Selma, interstate commerce was involved because "the actual persons and things involved are themselves within the flow of commerce." Id. at 674.
The court explained:
The Physicians entered the flow of interstate commerce when they moved from South Carolina to Alabama. In fact, the sole purpose of the Agreements was to place the Physicians within the current of commerce and to move them to Alabama . . . . Accordingly, when the Physicians moved across state lines, they became "persons . . . in interstate commerce." As part of the flow of commerce, then, the Physicians were properly subject to congressional regulation.
The flow of commerce begins before, and ends after, the actual movement across State lines, in order to fulfill the purpose of the overall transaction. . . . .
. . . .
The Agreements required the Physicians to move themselves and their medical practices from South Carolina to Selma, Alabama, to provide anesthesia services to patients in the Selma community. Thus, the agreements were themselves an integral part of the Physicians' movement in the flow of commerce, subjecting their personal-service contracts to the jurisdiction of the FAA. Id. at 675 .
Having determined the physicians were part of the flow of interstate commerce, the Selma court did not need to decide whether the physician recruitment agreements substantially affected commerce.
"When a case involves allegations of the use of the instrumentalities of interstate commerce, or persons or things in interstate commerce, a court need not reach the question whether the underlying transaction 'substantially affects' interstate commerce, because such persons and things, by definition, substantially affect--because they are components of--interstate commerce." Id. at 674.