Arkansas Supreme Court Federal Arbitration Innapplicable to Contract Between Doctor and Local Clinic, Notwithstanding Clinic's Use of Foreign Medical Supply Companies and Insurers (and Three Out-of-State Patients)
In Arkansas Diagnostic Center, P.A. v. Dr. Abdalla Tahiri, M.D., No. 06-667, the Arkansas Supreme Court holds that the Federal Arbitration Act does not reach the employment contract of a local doctor who treats local patients at a local clinic, notwithstanding the local clinic's use of out-of-state medical supply companies, business with out-of-state insurance companies, and treatment of three out-of-state patients.
Dr. Tahiri had an employment contract containing an arbitration provision. He sued the Clinic, which moved to compel arbitration. Pulaski County Circuit Judge Ellen Brantley denied the motion, and the Arkansas Supreme Court affirmed.
The Arkansas Uniform Arbitration Act does not apply to employment contracts, but the FAA does. Thus, the question on appeal was whether the Federal Arbitration Act, which applies to any "contract evidencing a transaction involving commerce," applied to Dr. Tahiri's contract.
The Court noted that the United States Supreme Court has held that the Act extends to "the broadest permissible exercise of Congress' Commerce Clause power." But at the same time, the United States Supreme Court has also held that the Act does not preempt state arbitration acts.
In this case, the proof offered by the clinic of its out-of-state activities--using out-of-state medical supply companies, dealing with out-of-state insurance companies, even treating three out of state patients--didn't quite reach the threshold. The opinion implies (and Justice Brown's concurrence makes explicit) that the Clinic did not prove a sufficient causal nexus between Dr. Tahiri's activities and the Clinic's limited out-of-state contacts.
