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Shah v. Star Anesthesia, P.A.

Court of Appeals of Texas, Fourth District, San Antonio

May 22, 2019

Jaydeep SHAH, M.D., Appellant
v.
STAR ANESTHESIA, P.A., Appellee

          From the 224th Judicial District Court, Bexar County, Texas Trial Court No. 2018-CI-04393 Honorable Michael E. Mery, Judge Presiding

          Sitting: Sandee Bryan Marion, Chief Justice Patricia O. Alvarez, Justice Liza A. Rodriguez, Justice

          OPINION

          PATRICIA O. ALVAREZ, JUSTICE

         In this arbitration dispute, Appellant Jaydeep Shah, M.D., appeals the trial court's confirmation of an arbitration award in favor of Appellee Star Anesthesia, P.A. and the denial of Shah's motion to vacate the arbitration award.

         In 2007, Shah entered into a Professional Services Agreement with Star Anesthesia to perform anesthesia services and became a partner and shareholder of Star Anesthesia. The agreement contained a binding arbitration agreement. On December 30, 2016, Star Anesthesia terminated its employment agreement with Shah. The parties submitted their dispute to binding arbitration pursuant to their agreement. After a contested hearing, the arbitrator issued a final award in Star Anesthesia's favor.

         Star Anesthesia filed a motion to confirm the arbitration award; and Shah subsequently filed a motion to vacate. On June 12, 2018, after hearing arguments, the trial court confirmed the arbitration award, denied Shah's motion to vacate, and entered final judgment.

         On appeal, Shah contends: (1) the arbitrator improperly considered and ruled on evidence not raised or pled by Star Anesthesia; (2) the arbitrator improperly failed to find Shah a prevailing party on Star Anesthesia's counterclaim, and therefore improperly awarded attorney's fees and costs only to Star Anesthesia; (3) the awarded attorney's fees failed to distinguish between fees spent to defend the claim and those spent to advance counterclaims; and (4) the arbitrator's attorney's fees award is not supported by either the arbitration clause or the Federal Arbitration Statute. We affirm the trial court's judgment.

         Factual Background[1]

         A. The Professional Services Agreement

         In November of 2007, Shah entered into a Professional Services Agreement with Star Anesthesia to provide anesthesiology services. The agreement required Shah to "devote [his] time and loyalty to the Association." Shah was further prohibited from "contract[ing] with, be[ing] employed by, or otherwise practic[ing] anesthesiology except with the Association unless otherwise authorized by the Board of Directors of the Association."

         As part of the agreement, Star Anesthesia provided management and administrative services to Shah and its other physicians. Star Anesthesia was also the exclusive provider of anesthesia services to Baptist Health System. Star Anesthesia, Baptist Health System, and Shah entered into a contract in which Shah received guaranteed collections of $500, 000.00 per year. In 2012, Star Anesthesia's contract with Baptist Health System was amended; Shah was not a party to the amended contract. Shah, however, continued to serve as the full-time pediatric anesthesiologist and benefit from the guaranteed collections "despite not [being] specifically identified as the intended beneficiary of [the contract]."

         In November 2016, after negotiations, Star Anesthesia and Baptist Health System entered a contract eliminating the previous $500, 000.00 guaranteed collections. Shah was not informed of the change prior to the new contract taking effect on December 1, 2016.

         Shah filed suit alleging multiple claims, including breach of contract, breach of fiduciary duty, fraud, and tortious interference. Shah sought recovery of attorney's fees and costs. Star Anesthesia filed a general denial and asserted multiple affirmative defenses, and counterclaims for breach of contract, breach of fiduciary duty, and fraud by nondisclosure.

         B. Discovery Dispute

         A hearing was held before the arbitrator in October 2017 regarding whether the written minutes taken during a December 7, 2016 Baptist Health System Department of Pediatric Medicine Meeting were discoverable. Shah argued the minutes were not discoverable "because they were privileged as minutes of a medical peer review." Star Anesthesia countered the minutes should be "discoverable because they likely would shed light on whether (1) Dr. Shah made certain statements at the meeting, and (2) whether those statements gave rise to his termination for cause under the moral turpitude provision in his employment agreement."

         The arbitrator ordered the minutes withheld.

         When the matter was called for Final Hearing before the arbitrator, Shah was ordered to testify regarding statements he made during the December 7, 2016 peer review meeting. The arbitrator designated the testimony as "highly confidential" under the existing protective order. In response to his having to testify to the meeting, Shah urged that he be allowed to use the written minutes he previously argued should be "withheld from discovery." Star Anesthesia argued unfair surprise and the arbitrator did not allow the minutes into evidence.

         The arbitrator's award specifically provided the minutes were not considered in the Final Award.

         C. Arbitrator's Award

         On March 6, 2018, the arbitrator filed a Final Award providing as follows: The arbitrator found in favor of Star Anesthesia and against Shah on Shah's breach of contract for, inter alia, the following reasons:

• Shah was not entitled to participate in the negotiations or notice of negotiations with Baptist Health System.
• Shah's comments, "wearing of two hats, and the actions he took in furtherance of those dueling loyalties, constituted a conflict of interest, created a firestorm among the surgeons, and resulted in what became overwhelming evidence of conduct that would bring [Star Anesthesia] into public disrepute."
• "Star [Anesthesia] established, by a preponderance of the evidence, that it had sufficient justification to terminate Dr. Shah for cause-moral turpitude-without relying upon statements [Shah] made at the December 7 meeting."
• Dr. Shah admitted in cross-examination that he had been afforded all required due process.

         The arbitrator also found in favor of Star Anesthesia and against Shah on discrimination under 42 U.S.C. § 1981 claims and that Shah failed to prove his claims for breach of fiduciary duty, fraud, and tortious interference.

         Except for the affirmative defense of justification, the arbitrator did not consider Star Anesthesia's affirmative defenses "because they were moot in view of the adverse rulings on Dr. Shah's claims."

         On the other hand, the arbitrator held the evidence conclusively established Star Anesthesia had actual notice that Shah was serving as System-wide Medical Director at Baptist Health System; however, none of the testifying witnesses knew Shah was being compensated for such role. The arbitrator held the evidence "established that Star [Anesthesia] considered Dr. Shah's involvement in the day-to-day affairs of [Baptist Health System] to be of value to Star [Anesthesia]. For these reasons, [Star Anesthesia] failed to prove its breach of contract claim by a preponderance of the evidence." The arbitrator also concluded Star Anesthesia failed to prove any fiduciary duty existed or was ...


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