By Mindy Nunez Duffourc and Matthias Haag
Introduction
In May 2018, the General Assembly of German Physicians voted to lift the ban on remote treatment that was previously contained in Article 7(4) of the Model Professional Code for Physicians in Germany. The earlier rules prohibited a doctor from diagnosing or treating a patient until an in-person examination was conducted. Lifting this restriction promises to put German doctors on an equal footing with their European counterparts, many of whom are legally permitted to provide cross-border telemedical treatment within the European Union pursuant to the EU directive on the application of patients’ rights in cross-border healthcare (2011/24/EU). In addition, German providers can join the growing global telemedicine market and contribute to the international goal of using telemedicine to increase healthcare access and quality while lowering cost. Of course, increased use of telemedicine comes with the potential for increased malpractice liability. Cross-border provision of telemedicine adds additional complexity to liability concerns.
The European Union provides some legal uniformity for medical malpractice disputes arising from cross-border healthcare through Directive 2011/24/EU. For example, the Directive provides, as a default rule, that the laws of the member state providing treatment govern the underlying medical malpractice disputes. It further clarifies that the member state providing treatment is the state where the healthcare provider is established. Unfortunately, no such guidance exists for disputes arising out of cross-border treatment between telemedicine participants in the United States and Germany.
To avoid liability in a foreign state or under foreign law, healthcare providers might include forum selection and choice-of-law clauses in international telemedicine contracts. To explore questions regarding whether these clauses are valid under American and German law, I consider the following hypothetical scenario:
An American patient seeking a second opinion regarding a differential diagnosis of myocarditis discovers a telemedical service in Germany that provides second opinions from physicians at a renowned German medical center headquartered in Munich. The medical center’s website advertises international telemedicine services, which can be obtained by filling out an online form. The second opinion is not covered by the patient’s insurance and the cost of a second opinion from Germany is less than half the cost of one in the United States. As instructed by the German medical center, the patient sends her electronic medical records and radiographs to Germany for evaluation. The second opinion diagnoses the patient with stress-induced cardiomyopathy. After reading about stress-induced cardiomyopathy online, the patient decides to wait a few months before agreeing to undergo an endomyocardial biopsy to confirm the myocarditis diagnosis. Ten weeks later, the patient suffers from a stroke resulting in severe disability. A myocarditis diagnosis is later confirmed. The patient files a lawsuit in a U.S. federal district court against the German medical center and the physician who rendered the second opinion, seeking more than $75,000 in damages. The German providers ask the court to dismiss the lawsuit in favor of a German venue and/or decide that German law governs the litigation pursuant to the following language in the contract: “Any and all claims and causes of action arising out of or relating to this Agreement, whether sounding in contract or tort shall be governed by the law of the Federal Republic of Germany. The exclusive place of jurisdiction shall be Munich in Bavaria, Federal Republic of Germany.” The plaintiff claims that the choice-of-law and forum selection clauses are invalid.
Discussion
Does the U.S. court have jurisdiction to decide the validity of the choice-of-law and forum selection clauses?
The court will likely have subject matter jurisdiction over the dispute under 28 U.S.C. § 1332 because it involves U.S. citizens and foreign citizens and the amount in controversy exceeds $75,000. The court will also likely have personal jurisdiction over the German defendants under McGee v. International Life Insurance Co. because the German providers voluntarily contracted with a U.S. citizen and received a benefit and because the United States has an interest in protecting its citizens. Finally, the forum-selection clause does not divest the court of jurisdiction to determine the choice clauses’ validity.
Which law governs the validity of the choice-of-law clause in the United States?
U.S. law will govern the validity of the choice-of-law clause because validity is a threshold issue that should be decided, not under the law specified in the clause, but by the law of the forum state. Pursuant to Klaxon Co. v. Stentor Electric Manufacturing Co., a federal court sitting in diversity will likely apply state law to determine the validity of the choice-of-law clause.
Is the choice-of-law clause valid under American law?
Preliminarily, note that the hypothetical choice-of-law clause is broad enough to cover tortious and contractual medical malpractice claims. As Coyle discusses in detail, a narrower clause, only designating law to govern the agreement, would not apply to tortious medical malpractice claims in several U.S. jurisdictions.
Twenty-nine states will apply §187(2) of the Restatement (Second) of Conflict of Laws to evaluate the validity of the choice-of-law clause. Under §187(2)(b), the choice-of-law clause will not be valid if the chosen law is “contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which . . . would be the state of the applicable law in the absence of an effective choice of law by the parties.” In the absence of a choice, the Restatement calls for the “law of the consumer’s habitual residence.” As a result, one must evaluate the public policies of the U.S. state in which the hypothetical patient resides to determine the validity of the choice-of-law clause.
In any state, one must consider policies advancing consumer protection since the hypothetical contract is a consumer contract. Ruhl and Hall & Schneider note that consumers, and especially patients, have “inferior bargaining power” compared to their professional contracting partners, which compels many legal systems to protect consumers by restricting their freedom to choose the applicable law. In the United States, the Federal Trade Commission’s Bureau of Consumer Protection acknowledges that “many U.S. courts refuse to uphold such clauses because it would be contrary to the fundamental public policy of the consumer’s home jurisdiction.” As a result, the strength of a state’s consumer protection record will usually correspond with the likelihood that a court will invalidate a choice-of-law clause to protect a consumer in that state.
Ultimately, I agree with the Second Circuit, who, relying on Piper Aircraft Co. v. Reyno, found that the validity of a foreign choice of law clause depends on “whether the application of the foreign law presents a danger that the . . . [plaintiff] ‘will be deprived of any remedy or treated unfairly.’” The hypothetical plaintiff is not deprived of a legal remedy because §§ 823 and 280 of the German Civil Code recognize legal causes of action for medical malpractice in tort and contract, respectively. Although the lack of uniformity in U.S. jurisprudence and consumer protection laws makes it difficult to predict the validity of choice clauses in consumer contracts, I find preliminarily that the application of German law alone would likely not violate the public policy of the hypothetical patient’s home state.
Which law governs the validity of the forum-selection clause (“FSC”) in the United States?
There is a possibility that a U.S. federal district court would apply German law to determine the validity of the foreign FSC. Both the Fourth and Tenth Circuits have applied foreign law designated in a choice-of-law clause to determine whether a foreign FSC was mandatory or permissive. However, since my hypothesis challenges the validity, not interpretation, of the FSC and additionally challenges the validity of the choice-of-law clause, I predict that U.S. law will govern FSC validity.
Next, I consider whether state or federal procedural common law governs FSC validity. Though there is a circuit split and the Supreme Court has not addressed the question in a diversity case, the Court did indicate in Stewart Organization, Inc. v. Ricoh Corporation, The Bremen v. Zapata Off-Shore Co., and Atlantic Marine Construction Co. v. U.S. District Court that federal law triumphs. Even Kincaid, who provides an in-depth analysis of these two possibilities and argues that an Erie vertical choice-of-law analysis calls for the application of state law, admits that “[a] majority of circuits uses federal law to govern validity.” I thus conclude that federal law would govern the validity of the hypothetical FSC.
Is the forum selection clause valid under American law?
In Bremen, the Supreme Court presumes foreign FSCs in international contracts are valid unless the clause is unreasonable or unjust, contravenes a strong public policy of the forum state, or was the product of fraud or overreaching. This presumption stems from a hesitance to interfere with the “smooth functioning and growth of global commerce” as well as general principles of international comity and respect for foreign tribunals.
As noted above, many states further the public policy objective of protecting consumers by limiting their freedom to pre-select a forum. Though Bremen highlighted the existence of “an arm’s-length negotiation by experienced and sophisticated businessmen” in upholding the validity of a foreign FSC, the Court later in Carnival Cruise Lines, Inc. v. Shute found that the FSC on a ticket was valid and enforceable against a cruise ship passenger in a personal injury lawsuit. The Court explained that the defendant’s cruise line had an interest in limiting the fora in which it might be sued and avoiding costly litigation related to forum disputes. It also noted that the defendant’s savings from a valid FSC benefited passengers through reduced fares.
Following Carnival, the inclusion of an FSC in a consumer contract, even one of adhesion, is not enough to invalidate FSCs. Federal case law reveals that exceptions to the presumptive validity of FSCs are usually limited to cases in which the selected forum is unsafe for travel (8th Circuit), the plaintiff would be deprived of a legal remedy (9th Circuit, E.D. La.), the parties would be forced into multiple or piecemeal litigations (D.N.D., N.D. Ill., D. Minn.), the parties and the dispute have no connection to the chosen forum (W.D. Tenn.), enforcement would violate statutory venue provisions (7th Cir., W.D. Tex., N.D. Ill., M.D. Ga.), the chosen state’s consumer protection laws do not apply to the plaintiff (S.D. Texas), and the plaintiff is deprived of a right to jury trial (C.D. Cal.).
The hypothetical case does not require travel to a dangerous country; the patient would not be deprived of a legal remedy or forced into multiple or piecemeal litigations; and the dispute has a clear connection to Germany. Conversely, she would be deprived of a jury trial. More importantly, all U.S. states have regulated in the area of telemedicine to protect patients. Although only Louisiana’s telemedicine law provides a statutory venue provision, there is a compelling argument that all states have expressed a strong public policy interest in protecting patients and regulating medical practice in their jurisdictions.
Additionally, state telemedicine regulations can be considered a measure of consumer protection unavailable in Germany because a provider’s violation of telemedicine laws could support a negligence finding against the provider. Like one California federal court, I find it persuasive that the combined effect of a choice-of-law clause and FSC would deprive the plaintiff of the protection that the states’ telemedicine policies aim to provide. While it is most likely that federal courts in Louisiana and California would invalidate the hypothetical FSC as violating public policy, it is also possible that the post-Carnival exceptions to the presumptive validity of FSCs might expand to include cases involving telemedicine consumer contracts in all states, given the universal regulation of telemedicine.
Nevertheless, a complete analysis requires a consideration of these questions under German law as well.
Does the court in Munich have jurisdiction to decide the validity of the choice-of-law and forum selection clauses?
German law, which includes EU law, governs jurisdiction in Germany. Article 4 of Brussels I Recast vests jurisdiction in German courts because the defendant’s providers are domiciled in Germany. Additionally, there is a sufficient connection between the actions giving rise to the lawsuit and Germany as discussed in Recital (16). Finally, §§12, 13, and 17 of the German Code of Civil Procedure give the Munich court power to decide this dispute.
Which law governs the validity of the choice-of-law clause in Germany?
Rome I Article 3, in conjunction with Articles 10 and 11, provides the law for determining the validity of a contractual choice-of-law clause. Under Article 10, German law determines the clause’s material validity with the caveat that U.S. law applies to determine valid consent. In addition, Article 11 requires the application of U.S. law to govern the formal validity of the choice-of-law clause in a consumer contract.
Is the German choice-of-law clause valid under German law?
The principle of supremacy of EU law indicates that Rome I governs contractual obligations and Rome II governs non-contractual obligations. Rome I Article 6 provides special rules for consumer contracts. I will assume that the professional medical services in the hypothetical sufficiently targeted the United States. The hypothetical choice-of-law clause is allowed under Article 6.2, but the choice cannot deprive the patient of mandatory protections afforded by U.S. law, as that is the law of her habitual residence. As a result, if the applicable U.S. law would invalidate the choice-of-law clause, thereby not allowing the patient to derogate from the law of her habitual residence, then the German court would find that Rome I does not allow the patient to choose German law to govern her contract claims. Of course, as discussed above, it is difficult to predict a U.S. court’s position on the validity of the choice-of-law clause in this contract and this difficulty would likely lead a German court to find that the application of U.S. law is not mandatory and thus to honor the parties’ choice of German law.
For tort claims, Rome II Article 14 only allows a consumer agreement to a choice-of-law clause “after the event giving rise to the damage occurred.” In the absence of a choice, as in the hypothetical, Article 4 designates the law of the country where the damage occurs to govern tort claims. However, because the hypothetical parties entered into a contract that is “closely connected with the tort/delict in question,” German law would likely govern the tort claims as well.
Which law governs the interpretation of the forum selection clause in Germany?
According to Article 25 of Brussels I Recast, German law would govern the FSC’s substantive validity.
Is the forum selection clause valid under German law?
German Code of Civil Procedure §38 governs the substantive validity of the FSC. Parties can agree to a German forum when: (1) one of the parties is not a German resident, (2) the agreement is concluded or confirmed in writing, and (3) the chosen forum is the place of the German party’s residence or administrative center. The FSC’s formal validity is governed by Brussels I Recast, Article 25, under which the electronic agreement in the hypothetical satisfies the writing requirement. Furthermore, as noted, one of the parties is not German and the chosen forum corresponds with the German party’s residence. Thus, the hypothetical FSC is valid under German law.
Conclusion
The substantive laws governing medical malpractice in the United States and Germany are similar – both have fault-based medical negligence systems and apply similar standards of care – but differences in the countries’ procedural laws make a forum choice significant. For example, the lack of jury trials, use of uniform damage award tables, and cost-shifting rules in Germany lead to significantly lower awards for pain and suffering compared to those in the United States.
The increasing availability and use of telemedicine across international borders raises questions regarding the proper law and forum for international telemedicine disputes, especially those concluded outside of the European Union. Although American and German courts have not yet encountered such a dispute, the hypothetical considered here suggests that a direct telemedicine interaction between a German provider and an American patient could be subject to the jurisdiction and laws of the United States even when choice clauses designate German law and jurisdiction.
Mindy Nunez Duffourc is currently a Ph.D. candidate at the University of Passau and attorney at Burglass Tankersley in Louisiana. She served as an Alexander von Humboldt German Chancellor Fellow from 2016-2017. She received her J.D. from the University of North Carolina in 2008.
Matthias Haag is an 9th semester German law student at the University of Passau. He also works as a research assistant at the Chair of Public Law, Media and Information Law at the University.