In a case that is instructive for healthcare employers in drafting contracts with physicians and other contract employees, a Florida district court of appeal reversed a trial court’s grant of certification of a class of emergency room physicians because of discretionary language in their contracts. 

InPhyNet Contracting Services, Inc. v. Soria involved a claim against a company that contracted with physicians to staff hospital emergency rooms.  As a part of its contract with each physician, InPhyNet provided a bonus program.  The contracts stated that the bonus pool would be maintained on a facility-by-facility basis and the amounts to be placed in the bonus pool for each facility would be at InPhyNet’s “sole discretion.”

When Dr. Soria terminated his contract with InPhyNet to go to a competitor, InPhyNet sued him to enforce a covenant not to compete.  In response, Dr. Soria filed a counterclaim against InPhyNet on behalf of himself and all doctors employed by them claiming the company failed to pay them all bonuses allegedly due them under the contracts, which were nearly identical for each physician.  The complaint alleged that the physicians were entitled to 60% of each facilities’ profits and that InPhyNet artificially inflated its expenses, thereby reducing the profits available for the bonus pool.   

The trial court granted class certification un Florida’s rules for class certification, which are essentially the same as Rule 23 of the Federal Rules of Civil Procedure, which govern class actions in federal court. In reversing the trial court’s decision, the district court of appeal ruled that class certification was improper because the individual questions would predominate over issues common to all class members.  Specifically, the court found that because the contracts expressly provided that the amounts to be placed in the bonus pool were at InPhyNet’s “sole discretion,”  the only way the physicians could establish liability would be by oral promises, if any, made to the individual physicians. Such an analysis, the court held, would require individualized determinations regarding what was promised to each physician, ultimately requiring a series of mini-trials - - which are wholly inappropriate for class treatment. 

Because many healthcare employers utilize contract employees to staff their facilities, this case is a good reminder of  the importance of discretionary language in a contract.  Such language not only helps protect the employer in suits by individual employees, but also, as this case demonstrates, can be useful to prevent employees from achieving class status in a lawsuit. 

This entry was written by Edward H. Chyun and James P. Smith.