In this litigation over contractual bonus payments to physicians, the trial court certified a class of physicians, all of whom had similar contracts with InPhyNet. While InPhyNet has challenged the certification order on multiple grounds, we need address only one. Because the trial court failed to conduct an appropriate analysis of whether common questions predominated over individual issues, and the proper analysis shows that the common questions do not predominate, we reverse.
This case concerns the propriety of two related orders certifying a class of emergency room physicians currently or formerly employed by appellants, InPhyNet Contracting Services, Inc., and its parent Team Health, Inc., which in this opinion we refer to collectively as “InPhyNet.” InPhyNet contracts with hospitals around the state of Florida to provide physicians to staff hospital emergency rooms. In-PhyNet contracted with appellee, Dr. David Soria, to work as an emergency room physician at Wellington Regional Medical Center. To induce physicians to work in the emergency room, InPhyNet included a “Physician Incentive Plan” (PIP) as part of its contract with each physician it employed. With respect to the bonus payments, Dr. Soria’s contract stated:
We maintain Physician Incentive Plans on a facility-by-facility basis. All facility plans must be approved by our affiliate CEO and are subject to revision without notice to You or Your approval. Amounts to be placed in the bonus pool for any facility shall be at Our sole discretion. To the extent that a bonus pool is established for a facility, eligibility and payment shall be in accordance with the criteria set forth below.
To participate, a physician must work “full time” as defined in the agreement, not be in breach of his or her contract of employment, and have been working at least ninety days prior to the distribution date of the bonus payments. Each physician would be paid a portion of the bonus pool in accordance with a formula based upon various factors including the physician’s performance, productivity, teamwork, and length of service.
Dr. Soria acted as InPhyNet’s Medical Director at Wellington Regional until In-
Soria counterclaimed against InPhyNet in Soria I, raising a class action claim regarding the Physician Incentive Plan (“PIP”). We need not detail the complicated procedural moves in this case, but eventually Soria’s individual claim with respect to the bonus payments remained as a counterclaim in Soria I, and Soria filed a separate class action lawsuit, the present case (“Soria II ”).
Soria alleged in his class action complaint that the contracts of the physicians employed by InPhyNet included Physician Incentive Plans substantially similar to the one contained in Soria’s contract with In-PhyNet. He further alleged that “[u]nder the Physician Incentive Plan Dr. Soria and the other class members were entitled to receive as incentive compensation a percentage of the profits from Defendants’ contract with the respective facilities, including Wellington Regional.” (emphasis supplied). Soria alleged that InPhyNet had failed to pay the class members all of the incentive compensation to which they were entitled, claiming InPhyNet had inflated its expenses through a “phantom” expense line of “Other Physician Benefits” which reduced the profits available for bonus payments.
Soria alleged five different causes of action based upon the foregoing facts. First, he claimed that InPhyNet had breached an implied duty of good faith by failing to properly account for the revenues and expenses generated at each facility, specifically by including the “other Physician Benefits” which reduced the profits for the bonus distribution. This reduced payments to the class members. Second, he claimed that through this conduct InPhy-Net violated the Florida Deceptive and Unfair Trade Practices Act. Third, he alleged that InPhyNet had breached a fiduciary duty or engaged in constructive fraud in creating accounting statements which included the Other Physician Benefits, reducing the bonus pool available for the class members. Fourth, he alleged unjust enrichment on the ground that In-PhyNet retained benefits conferred by the class members but failed to properly compensate them. Finally, he also made a claim for conversion against InPhyNet.
The class Soria identified in his complaint included physicians previously employed by InPhyNet in Florida within the past five years, with some exceptions. The class included well over 100 members. Soria alleged that the common questions of fact or law among all class members involved the establishment of the Physician Incentive Plan at each facility and InPhy-Net’s practice of inflating expenses and reducing profits of each facility through the use of the Other Physician Benefit expense item. His own claim was typical of those of the class, and he alleged that he was an adequate representative of the class. The complaint alleged that common issues would predominate over individual claims.
After much procedural maneuvering and many discovery disputes, Dr. Soria moved to certify the class. InPhyNet requested an evidentiary hearing, contending that there were multiple disputed issues of fact in regard to the class certification. Nevertheless, the court conducted a non-eviden-tiary hearing lasting over two days with
In the end, the court granted certification of a class consisting not only of the class alleged in Dr. Soria’s complaint but expanding it to include physicians currently employed at any of the InPhyNet facilities. The court’s order addressed each of the threshold requirements of class certification, namely: 1) numerosity, 2) commonality, 8) typicality, and 4) adequacy.
As to the numerosity element, the trial court noted that there were at least 120 physicians who participated or were eligible to participate in appellants’ PIP plan, finding that “this number of proposed class members is sufficient to comply with the numerosity requirement” and that a separate joinder would be impracticable. As to commonality, the court concluded that Dr. Soria satisfied this requirement, reasoning that the putative class members “entered into substantially similar PIP agreements with the defendants” and that their claims “arise from the same course of conduct on the part of the defendants.” Specifically, the court noted that “all of the putative class members’ claims concern or relate to defendants’ use of the allegedly illegitimate expense category, ‘Other Physician Benefits,’ in their income statements, thereby reducing the amount of incentive benefits each physician received.”
The trial court further found that, despite the presence of unique defenses pertaining to Dr. Soria’s conduct at Wellington Regional, Dr. Soria’s claims “are typical of the claims of the other class members,” noting that the claims all centered on the appellants’ alleged practice of deceptively deducting non-existent expenses. However, as to the adequacy prong, the trial court found that Dr. So-ria failed to meet the adequacy requirement based on the potential conflict of interest with the other class members due to his pending counterclaim in his individual capacity in Soria I, reasoning that “Dr. Soria could possibly compromise the best interests of the class as a whole for a favorable result in his own personal lawsuit.” Consequently, the trial court stopped short of certifying the class in its first order, but stated that the conflict would be resolved if Dr. Soria dismissed or abated the counterclaim in Soria I.
The trial court then addressed the plaintiffs claims under rule 1.220(b)(3), finding that the defendants’ alleged use of an unsupported category of expense (“Other Physician Benefits”) in order to reduce the profitability at each facility where its physicians were employed, if true, presented common questions of law or fact which predominate over individual questions relating to the eligibility and/or amount of additional incentive benefits owed to any individual member of the class. The court thus found both that common questions predominated and that class resolution was a superior method of adjudication of the case.
Dr. Soria filed a voluntary dismissal in Soria I. Consequently, the court entered a second order confirming class certification, and InPhyNet now appeals both orders.
“Generally, we review a trial court’s certification of a class action using an abuse of discretion standard.”
Olen Props. Corp. v. Moss,
The movant for class certification bears the burden of establishing all the requirements of Florida Rule of Civil Procedure 1.220.
Chase Manhattan Mortg. Corp. v. Porcher,
Initially, the movant for class certification must establish the following four prerequisites, which are:
(1) the members of the class are so numerous that separate joinder of each member is impracticable, (2) the claim or defense of the representative party raises questions of law or fact common to the questions of law or fact raised by the claim or defense of each member of the class, (3) the claim or defense of the representative party is typical of the claim or defense of each member of the class, and (4) the representative party can fairly and adequately protect and represent the interests of each member of the class.
Fla. R. Civ. P. 1.220(a). These threshold requirements are often referred to as “the numerosity, commonality, typicality, and adequacy of representation elements of class certification.”
Marco Island Civic Ass’n v. Mazzini,
In addition to satisfying Rule 1.220(a), a plaintiff also must satisfy one of the three subdivisions of Rule 1.220(b).
1
Rule 1.220(b)(3), often applicable in actions predominantly seeking damages, requires that common questions of law or fact predominate over any individual questions of the separate members, and the class action must be superior to other available methods for a fair and efficient adjudication of the controversy.
Rollins, Inc. v. Butland,
InPhyNet does not challenge the trial court’s findings as to numerosity or typicality. It does argue, however, that the trial court’s analysis is inherently flawed as to commonality and predominance. It also argues that the trial court erred in failing to conduct an evidentiary hearing which would show that common issues would not predominate over individual issues, given the fact that the PIP plans in each of the fifteen facilities staffed by In-PhyNet were different. No company-wide method of calculating the bonus pool existed.
We agree that the court did not conduct a “rigorous analysis” of the predominance factor, but it is not necessary to remand for an evidentiary hearing. An examination of Dr. Soria’s complaint and the evidence produced shows that the common questions do not predominate. The trial court made no analysis, other than to state that the common question regarding the expense deduction for “Other Physician Benefits” predominated. It did not analyze any of the other issues involved in that determination.
Recently, the Eleventh Circuit addressed the issue of predominance in
Sacred Heart Health Systems, Inc. v. Humana Military Healthcare Services, Inc.,
Dr. Soria’s PIP plan, which he states is substantially similar to other class members’ plans, does not explain how the bonus pool is created. It simply states that a pool will be created at the “sole discretion” of InPhyNet. The complaint, however, states that the class members were entitled to a percentage of profits from the incentive plan. Nowhere in the written plan does InPhyNet represent that it will pay a percentage of the profits into a bonus pool; Yet, Dr. Soria’s entire complaint is based upon this representation and obligation on behalf of InPhyNet. Therefore, whether representations regarding the funding of the bonus pool were made by InPhyNet to its contract physicians must be determined before addressing the question of whether InPhyNet breached any obligations imposed as a result of that agreement.
This case is similar to Vega, where the Eleventh Circuit reversed a class action certification order concerning a T-Mobile incentive compensation plan. An employee brought a class action accusing T-Mobile of violating the plan by improperly charging back certain sales commissions previously earned by the employees. Although the Eleventh Circuit addressed multiple abuses of discretion with respect to the class certification order, the portion of the opinion most relevant to this case is the court’s discussion of the “predominance” element of Rule 23, which the court found to be “perhaps the central and overriding prerequisite for a Rule 23(b)(3) class.” Id. at 1278.
The appellate court found the absence of analysis on that factor to be fatal to the class certification order: “The district court’s omission of an independent and substantial, let alone rigorous, analysis of Rule 23(b)(3), in addition to the facts that Vega has not established predominance and likely has not shown superiority, further demonstrates that certification of this class was an abuse of discretion.” Id. at 1279. The court noted that T-Mobile’s compensation program document cautioned that “T-Mobile retains sole discretion to determine what transactions qualify for commission payout.” Id. at 1273. Even assuming that the compensation program created a binding contract, which arguably could create common issues of law and fact, the court reasoned that the class issues would still lack predominance. Id. In explaining the commonality and predominance problems associated with the class representative’s claims, the court noted that “whether or not a given commission charge back was ‘unjust’ will depend on what each employee was told and understood about the commission structure,” and as a consequence the “uncommon and individualized nature of this critical inquiry, and its foundational importance to the liability determination for each class member, renders class certification inappropriate.” Id. at 1275.
Similarly, whether or not a physician was promised that the bonus pool would be funded with a fixed percentage of the profits of InPhyNet must be determined on an individualized basis, because no written statement of the obligation exists. Like Vega, InPhyNet reserved “sole discretion” to determine the funding of a bonus pool. It is hard to imagine how one can translate “sole discretion” into a breach of an implied good faith duty in the accounting of the profits, without a representation on which a participating physician relied in entering into a contract with InPhyNet.
We therefore reverse the order granting certification of class status, as Dr. Soria has failed to prove that the common claim will predominate over the individual issues in this case.
Notes
. Without further comment, we hold that class certification is not appropriate in this case under either Rule 1.220(b)(1) or (b)(2).