Health Law Daily Forum selection clause in Vermont provider agreement valid and enforceable
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Monday, March 1, 2021

Forum selection clause in Vermont provider agreement valid and enforceable

By Jeffrey H. Brochin, J.D.

The clear purpose of a forum selection clause was to protect the Vermont agency from being hauled into court in foreign jurisdictions and the agency met the test for transfer to district court in Vermont.

A federal district court in New Hampshire has granted the motion filed by the State of Vermont Agency of Human Services (Vermont Agency) to transfer proceedings pertaining to the claims of New Hampshire hospitals (hospitals) to the district court in Vermont. The General Provider Agreements entered into between the Vermont Agency and the hospitals clearly provided in its forum selection clause for legal actions arising from the Agreement to be heard in a Vermont county court or in federal district court in Vermont, and the hospitals’ claims were deemed to in fact arise from the Agreement (Alice Peck Day Memorial Hospital v. Vermont Agency of Human Services, February 25, 2021, McCafferty, L.).

Vermont Medicaid—New Hampshire hospitals. The plaintiffs were New Hampshire hospitals located within 20 miles of New Hampshire’s border with Vermont, and each hospital provided medical services to Vermont Medicaid recipients. The hospitals entered into Provider Agreements with the Vermont Agency in order to receive reimbursement for services provided to Vermont Medicaid recipients. However, the New Hampshire hospitals, being located outside of Vermont, received state Medicaid reimbursement at significantly lower rates than Vermont hospitals that provided the same medical services to Vermont Medicaid recipients. They filed suit asserting that the difference in reimbursement rates for Vermont versus non-Vermont hospitals was unlawful and violated the Equal Protection Clause of the Fourteenth Amendment and the Commerce Clause of the United States Constitution. The Vermont Agency moved to transfer the proceedings to Vermont district court, which, for the reasons cited below, the court granted.

Contractual forum selection. Before the court can determine the merits of a 28 U.S.C. § 1404(a) motion to transfer venue pursuant to a contractual forum selection, it must first determine, as a preliminary matter, whether: (1) the parties entered into an enforceable contract containing a forum selection clause; (2) the clause is mandatory; and (3) the clause governs the claims in the lawsuit. The parties did not dispute the first prong of the test, but they did disagree as to whether the clause was mandatory and whether it applied to the instant claims. The burden was upon the Vermont Agency as the moving party, to establish the preliminary matters by a preponderance of the evidence.

Forum exclusivity. The court noted that while permissive forum selection clauses authorize jurisdiction and venue in a specified forum without prohibiting litigation in any different forum, mandatory forum selection clauses contain language clearly indicating that jurisdiction and venue will lie exclusively in the selected forum. The contractual language at issue provided that venue for legal actions arising from the Agreement "shall be" in Vermont, and the court therefore found that the language had a mandatory connotation, and that there could be no doubt that the forum selection clause was mandatory.

Claims "arising from." The court next turned to the issue of whether the hospitals’ claims "arose from" the Agreement. The hospitals argued that their claims were necessarily outside the scope of the forum selection clause because their claims did not sound in contract and because they arose out of reimbursement rates set in the Medicaid Plan, and not from the Agreements. The hospitals had not alleged a breach of any provision of the Agreements, but rather, they asserted constitutional tort and statutory violations in connection with provisions of the Medicaid Plan and with the Vermont Agency’s conduct in promulgating those provisions. However, the court disagreed, and found that for purposes of the Agreements’ forum selection clause, the claims did indeed arise out of the Agreements.

But for the Agreements, the Vermont Agency would owe the hospitals no duty in connection with the Medicaid Plan or Medicaid reimbursement, and the hospitals would lack standing to bring their claims. However, under the express terms of the Medicaid Plan and as a matter of federal law, execution of the Agreements was a necessary prerequisite for the hospitals’ participation in the Vermont Medicaid program, and their eligibility to receive reimbursement under the Medicaid Plan for providing medical services to Vermont Medicaid recipients.

For the foregoing reasons, the court concluded that the Vermont Agency met the three-prong test for transfer, that the forum selection clauses were in fact mandatory, and accordingly granted the motion for transfer to Vermont district court.

The case No. 1:20-cv-00919-LM.

Attorneys: Kierstan Ellicott Schultz (Nixon Peabody LLP) for Alice Peck Day Memorial Hospital. Eleanor Laurel Pullin Spottswood, Office of the Attorney General, for Vermont Agency of Human Services, Secretary.

Companies: Alice Peck Day Memorial Hospital; Vermont Agency of Human Services, Secretary

MainStory: TopStory CaseDecisions CMSNews MedicaidNews MedicaidPaymentNews ProgramIntegrityNews ProviderNews NewHampshireNews

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