Feb 04 2015, 9:54 am
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Randall J. Nye Michael D. Sears
O’Neill McFadden & Willett LLP Jacquelyn S. Pillar King
Schererville, Indiana Crist, Sears & Zic, LLP
Munster, Indiana
Heather Fesko Delgado
Barnes & Thornburg LLP
Chicago, Illinois
IN THE
COURT OF APPEALS OF INDIANA
Community Anesthesia & Pain February 4, 2015
Treatment, L.L.C., Court of Appeals Case No.
45A03-1401-PL-44
Appellant,
Appeal from the Lake Superior Court
v.
The Honorable Diane Kavadias
Schneider, Judge
St. Mary Medical Center, Inc.,
Appellee. Cause No. 45D11-1001-PL-4
Brown, Judge.
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[1] Community Anesthesia & Pain Treatment, LLC, (“CAPT”) appeals the trial
court’s order entering summary judgment in favor of St. Mary Medical Center,
Inc., (“SMMC”) with respect to Count I of SMMC’s complaint and Counts II
and III of CAPT’s counterclaim. CAPT raises three issues which we
consolidate and restate as whether the trial court erred in entering summary
judgment in favor of SMMC. We affirm.
Facts and Procedural History
[2] Prior to August 2006, a group headed by Dr. G1 provided anesthesia services at
SMMC. Dr. G was losing staff due in part to personal conflicts. On August 15,
2006, SMMC and CAPT entered into a contract to arrange for hospital-based
services (the “Agreement”) in which CAPT would provide anesthesiology
services for patients at SMMC beginning on October 2, 2006, for a period of
three years. At the request of SMMC, Dr. G became the medical director of the
CAPT group. SMMC informed CAPT that a critical part of the Agreement
was that CAPT keep Dr. G.
[3] Section 6.3 of the Agreement addressed compensation and provided in part that
SMMC would pay CAPT a monthly income guarantee of $175,000 on the first
day of each month and that, on or before the fifteenth day of each month,
1
Both parties refer to this individual as Dr. G although he is identified in the record as Dr. Jorge Gonzalez.
(Appellant’s Brief at 4; Appellee’s Brief at 5; Appellant’s Appendix at 241)
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CAPT would remit to SMMC all of its net anesthesiology collections received
in the immediately prior month up to $175,000. Section 6.3(b)(3) provided:
The annual income guarantee for such initial term shall be $2,100,000,
payable by [SMMC] to [CAPT] as provided in this Section 6.3(b).
Within forty-five (45) days following the end of each contract quarter
during each of the three (3) years of the initial term of this Agreement,
the parties shall complete an accounting reconciliation of [CAPT’s]
Net Anesthesiology Collections and compare such Net Anesthesiology
Collections for the most recently ended contract quarter to the
quarterly guaranteed net collections amount of $525,000 (the
“Quarterly Income Guarantee Amount”). If [CAPT’s] Net
Anesthesiology Collections exceed the Quarterly Income Guarantee
Amount, and if [SMMC] has accrued any shortfall amounts (as
described in subsections (2), above), then [CAPT] shall pay [SMMC]
within fifteen (15) calendar days of the completion of such
reconciliation the aggregate of all such shortfall amounts, up to the
amount by which [CAPT’s] actual Net Anesthesiology Collections
exceeds the Quarterly Income Guarantee Amount for such contract
quarter. The accounting reconciliation for the fourth (4th) quarter of
each of the three (3) years of the initial term of this Agreement shall
serve as the annual reconciliation, such that at the conclusion of each
year of the initial term, a full and complete reconciliation for such year
shall be achieved as provided in this subsection. Final reconciliation
shall occur at the end of the three (3) year term.
Appellant’s Appendix at 155.
[4] Section 9.15 of the Agreement contained a non-solicitation clause which
provided in part that SMMC agreed to not directly or indirectly solicit any
physician who was employed by or under contract with CAPT at any time
during the eighteen months prior to the date of termination of the Agreement.
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Section 3.12 of the Agreement is titled “Locum Tenens Physicians” 2 and
provided:
For the first three (3) months of this Agreement, or at any time upon
[SMMC’s] request to remove a Physician per Section 8.4 if a mutually
agreeable and reasonable amount of time is not provided to replace
such Physician, it may be necessary for [CAPT] to retain one or more
locum tenens physicians specializing in the practice of Anestbesiology
[sic] (the “Locum Tenens Physician”) to provide Anesthesiology
Services. In such a case, [SMMC] shall reimburse [CAPT] for fifty
percent (50%) of all direct and indirect costs of each and every Locum
Tenens Physician incurred by [CAPT], upon receipt of a written
invoice for those costs.
Id. at 149.
[5] During the first year of the Agreement between November 16, 2006, and
September 7, 2007, SMMC paid $1,575,000 to CAPT consisting of nine
payments of $175,000. CAPT remitted payments to SMMC of $820,763.75.
During the second year, from October 1, 2007, to September 2, 2008, SMMC
paid $2,139,504 to CAPT consisting of eleven payments of $175,000 and a
payment of $214,504, and CAPT paid SMMC $2,505,124. In October 2008,
SMMC paid $175,000 to CAPT, and CAPT did not remit any net collections to
SMMC.
2
“Locum tenens” is defined generally as “[a] deputy; a substitute; a representative.” BLACK’S LAW
DICTIONARY 959 (8th ed. 2007).
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[6] On March 14, 2007, Milton Triana, the CEO / Administrator of SMMC, held a
meeting with Dr. G and told him that he needed to change the manner in which
he dealt with staff, and Dr. G admitted he needed to change his demeanor and
to be nicer to staff. In a letter dated May 18, 2007, Triana informed Dr. Steven
Gottlieb of CAPT that he was providing notice in accordance with Section 8.4
of the Agreement that SMMC was requesting the removal of Dr. G from
services with SMMC due to the fact that SMMC perceived him to be a
“problematic physician.” Id. at 240. The letter also stated: “We understand
that a reasonable period of time may be necessary for an appropriate transition
of services as mutually agreed by the parties.” Id. In a letter dated July 19,
2007, Triana wrote Dr. Tushar, the chief operating officer of CAPT, and
informed him that Dr. G had completed an anger management course and that
Triana reconsidered his initial request and would allow Dr. G to remain
working at SMMC.
[7] In an email dated March 25, 2008, Dr. Ramani informed Janice Ryba, an
administrator for SMMC, that Dr. G resigned his position as an
anesthesiologist at SMMC and that Dr. G informed CAPT that his last date of
service would be June 13, 2008. The message also stated: “We have already
been in contact with several well-qualified anesthesiologists regarding his open
position and are confident that SMMC surgeons will continue to have excellent
anesthesia service.” Id. at 168. In a letter dated April 18, 2008, Ryba informed
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Dr. Gottlieb of CAPT that SMMC requested the removal of Dr. G. At some
point, Dr. G no longer worked for CAPT.3
[8] On November 21, 2008, CAPT and SMMC entered into a termination
agreement (the “Termination Agreement”) in which the parties agreed to
terminate the Agreement with an effective date of December 1, 2008. The
Termination Agreement provided that CAPT agreed to “release Kandiyur
Seshadri, M.D. (‘Dr. Seshadri’) from any and all applicable restrictive
covenants that exist between CAPT and Dr. Seshadri, as well as any provisions
of the Agreement which otherwise would prohibit [SMMC] from directly or
indirectly employing or retaining Dr. Seshadri to provide anesthesia services at
[SMMC] . . . .” Id. at 96-97. The release was conditioned upon SMMC paying
CAPT $100,000 and compliance by SMMC with obligations under the
Termination Agreement and certain provisions of the Agreement including
Section 3.12 dealing with locum tenens, Section 6.3 dealing with compensation,
and Section 9.15 dealing with non-solicitation. In an email dated December 11,
2008, Dr. Ramani sent Ryba data for locum tenens reimbursement which
indicated that SMMC owed CAPT $219,378.47.
[9] On May 20, 2009, SMMC filed a complaint against CAPT alleging: Count I,
breach of contract; Count II, conversion; Count III, interference with
prospective business advantage; Count IV, constructive fraud; Count V, unjust
3
In its statement of facts, CAPT asserts that Dr. G’s last day of service was to be June 13, 2008, but does not
assert the date of his actual last day.
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enrichment; Count VI, imposition of constructive trust; and Count VII, action
for an accounting. On July 24, 2009, CAPT filed its answer and counterclaim.
In its counterclaim, CAPT alleged: Count I, breach of contract based upon
SMMC’s failure to pay amounts due upon reconciliation of Agreement; Count
II, breach of contract based upon SMMC’s failure to reimburse locum tenens
costs; and Count III, breach of contract based upon SMMC’s violation of the
non-solicitation provision of the Agreement.
[10] On March 30, 2012, both parties filed motions for summary judgment. CAPT’s
motion alleged that “summary judgment will reserve for trial only the claims
between the parties for failure to pay amounts due upon reconciliation of the
[Agreement] presented by Count I of the Complaint and Count I of the
Counterclaim.” Id. at 124. On September 6, 2012, the court held a hearing on
the motions.
[11] On June 28, 2013, the court entered an order which provided in part:
CONCLUSIONS OF LAW
*****
2. The parties’ Motions for Summary Judgment, and, specifically,
their respective breach of contract claims, center around three
issues: (1) the meaning of the term “final reconciliation”; (2)
reimbursement of locum tenens costs to CAPT; and (3) the non-
solicitation provision contained in the Agreement.
3. Indiana law provides that a contract shall be interpreted as a whole
in a way that harmonizes all of its provisions and does not render
any words, phrases or terms meaningless. T-3 Martinsville, LLC v.
U.S. Holding, LLC, 911 N.E.2d 100, 111 (Ind. Ct. App. 2009)
(internal citations omitted)[, clarified on reh’g, trans denied].
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4. Applying this standard to Section 6.3 of the Agreement, the Court
hereby finds that this provision provided for four types of
reconciliation-monthly, quarterly, annual and final. To accept
CAPT’s position that the “final reconciliation” is the last annual
reconciliation would render “final” redundant in light of the
annual reconciliations and would also render some provisions of
the Section meaningless. CAPT’s interpretation is inconsistent
with the Agreement, which provided that “a full and complete
reconciliation” shall be achieved for each year at the annual
reconciliation. If, as CAPT contends, there is no carry over in
reconciliations from year to year, there would also be no reason to
provide for a final reconciliation, as the annual reconciliation
provision cited herein ensures that each year is reconciled.
5. Additionally, while the Court finds that the Agreement is not
ambiguous, even assuming arguendo that it was, any such
ambiguity would be construed against CAPT, as the drafter of the
Agreement. Citizens Financial Services, FSB v. Innsbrook Country
Club, Inc., 833 N.E.2d 1045, 1058 (Ind. Ct. App. 2005) (internal
citations omitted)[, reh’g denied].
6. Therefore, the Court finds that summary judgment should be
GRANTED as to [SMMC] and DENIED as to CAPT regarding
Section 6.3 and the reconciliation provisions contained therein.
7. As for reimbursement of locum tenens costs, there is no dispute that
[SMMC] requested the removal of a problematic physician, as
allowed by the Agreement. However, at the time of removal, the
undisputed evidence demonstrates that the physician’s resignation
had already been submitted and that CAPT was not providing an
adequate number of physicians, e.g., four. Section 3.12 provided
that if a mutually agreeable and reasonable period of time is not
provided for replacement of the “problematic physician,” CAPT
may have to retain locum tenens physicians. There is no evidence
before the Court that the reason CAPT incurred locum tenens costs
from April to November of 2008 was the result of the removal
request made by [SMMC].
8. Therefore, the Court finds that summary judgment should be
GRANTED as to [SMMC] and DENIED as to CAPT regarding
Section 3.12 and the reimbursement of locum tenens costs.
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9. [SMMC] is only liable under the non-solicitation provision if it had
violated Sections 6.3 or 3.12 of the Agreement, and this Court
finds, as a matter of law, it has not, as evidenced by the preceding
paragraphs.
10. However, even if there was a genuine issue of material fact as to
whether [SMMC] breached Section 3.12 and/or Section 6.3 of the
Agreement, the non-solicitation provision is unenforceable under
Indiana law, as CAPT does not have a protectable business interest
in that it has no operations in Indiana and cannot claim an interest
in the patients of [SMMC]. Duneland Emergency Physician’s Medical
Group, P.C. v. Brunk, 723 N.E.2d 963, 966 (Ind. Ct. App. 2000)[,
trans. denied].
11. Therefore, the Court finds that summary judgment should be
GRANTED as to [SMMC] and DENIED as to CAPT regarding
breach of the non-solicitation provision.
12. While the testimony of the CFO of [SMMC] supported [SMMC’s]
claims for damages, in light of the various amounts contained in
the documents submitted by the parties, the Court will withhold
entering a judgment of damages and will schedule a damages
hearing to be conducted at a later date relative to the claims of
[SMMC].
13. The Court finds that no genuine issue of material fact forecloses
summary judgment in favor of CAPT as to Counts II through VII
of [SMMC’s] Complaint, and CAPT has demonstrated its
entitlement to judgment as a matter of law relative to these Counts.
Therefore, summary judgment is GRANTED to CAPT as to
Counts II through VII of [SMMC’s] Complaint.
Judgment
IT IS THEREFORE ORDERED that pursuant to Rule 56 of
the Indiana Rules of Trial Procedure, the Motion for Summary
Judgment filed by Plaintiff/Counter-Defendant [SMMC] is
GRANTED as to Count I of its Complaint and all claims and
allegations contained in Defendant/Counter-Plaintiff’s
Counterclaim, and that the Motion for Summary Judgment
filed by Defendant/Counter-Plaintiff [CAPT] is GRANTED as
to Counts II through VII, inclusive, of the Complaint and
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DENIED as to Count I of the Complaint and all claims and
allegations contained in the Counterclaim.
Id. at 16-20. The court scheduled a hearing to determine SMMC’s damages for
August 19, 2013.
[12] On August 2, 2013, CAPT filed a motion for certification of interlocutory
appeal and an objection to determination of damages by the court. On August
19, 2013, the court held a hearing on CAPT’s motions, denied CAPT’s motion
for interlocutory appeal, and determined that trial by jury was appropriate for
the determination of the amount of damages. On January 15, 2014, the parties
filed an agreed judgment which ordered CAPT to pay $563,616.25 to SMMC
and provided that the agreed judgment not affect CAPT’s right to appeal the
court’s June 28, 2013 order or the agreed judgment.4 The court approved the
agreed judgment.
Discussion
[13] The issue is whether the trial court erred in entering summary judgment in
favor of SMMC with respect to Count I of its complaint and Counts II and III
4
The $563,616.25 amount is the difference between the total payments SMMC paid to CAPT, which was
$3,889,504, and the total amounts CAPT paid SMMC, which was $3,325,887.75. On appeal, CAPT alleges
in its statement of facts that it “submitted a ‘payments reconciliation’ which indicates that during the entire
contract period a total of $2,314,504.00 was paid by the Hospital to CAPT, while CAPT paid $2,505,124.00
to the Hospital.” Appellant’s Brief at 8. CAPT also notes that “[a]s an accommodation to the Hospital,
CAPT informally agreed, in January 2009, to go above and beyond the terms of its agreement by paying the
Hospital all receipts for a limited period of time to assist the Hospital in making up its substantial revenues
shortfall for the year 2007.” Id. at 8 n.3. On appeal, CAPT does not argue that the amount of $563,616.25
specified in the Termination Agreement is incorrect. Rather, it argues that the trial court misinterpreted the
Agreement.
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of CAPT’s counterclaim. Summary judgment is appropriate only where there
is no genuine issue of material fact and the moving party is entitled to judgment
as a matter of law. Ind. Trial Rule 56(C); Mangold ex rel. Mangold v. Ind. Dep’t of
Natural Res., 756 N.E.2d 970, 973 (Ind. 2001). All facts and reasonable
inferences drawn from those facts are construed in favor of the nonmovant.
Mangold, 756 N.E.2d at 973.
[14] The Indiana Supreme Court recently held that summary judgment is a “high
bar” for the moving party to clear in Indiana and held:
Summary judgment is a desirable tool to allow the trial court to
dispose of cases where only legal issues exist. But it is also a “blunt . .
. instrument,” by which “the non-prevailing party is prevented from
having his day in court.” We have therefore cautioned that summary
judgment is not a summary trial, and the Court of Appeals has often
rightly observed that it is not appropriate merely because the non-
movant appears unlikely to prevail at trial. In essence, Indiana
consciously errs on the side of letting marginal cases proceed to trial
on the merits, rather than risk short-circuiting meritorious claims.
Hughley v. State, 15 N.E.3d 1000, 1003-1004 (Ind. 2014) (quotations and
citations omitted).
[15] Our review of a summary judgment motion is limited to those materials
designated to the trial court. Mangold, 756 N.E.2d at 973. In reviewing a trial
court’s ruling on a motion for summary judgment, we may affirm on any
grounds supported by the Indiana Trial Rule 56 materials. Catt v. Bd. of Commr’s
of Knox Cnty., 779 N.E.2d 1, 3 (Ind. 2002). The entry of specific findings and
conclusions does not alter the nature of a summary judgment which is a
judgment entered when there are no genuine issues of material fact to be
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resolved. Rice v. Strunk, 670 N.E.2d 1280, 1283 (Ind. 1996). In the summary
judgment context, we are not bound by the trial court’s specific findings of fact
and conclusions thereon. Id. They merely aid our review by providing us with
a statement of reasons for the trial court’s actions. Id. The fact that the parties
make cross-motions for summary judgment does not alter our standard of
review. Hartford Acc. & Indem. Co. v. Dana Corp., 690 N.E.2d 285, 291 (Ind. Ct.
App. 1997), trans. denied. Instead, we must consider each motion separately to
determine whether the moving party is entitled to judgment as a matter of law.
Id.
[16] To the extent that this case requires that we interpret the Agreement or the
Termination Agreement, “[i]nterpretation of a contract is a pure question of law
and is reviewed de novo.” Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249, 252
(Ind. 2005). If a contract’s terms are clear and unambiguous, courts must give
those terms their clear and ordinary meaning. Id. Courts should interpret a
contract so as to harmonize its provisions, rather than place them in conflict.
Id. “We will make all attempts to construe the language of a contract so as not
to render any words, phrases, or terms ineffective or meaningless.” Rogers v.
Lockard, 767 N.E.2d 982, 992 (Ind. Ct. App. 2002). “A contract will be found
to be ambiguous only if reasonable persons would differ as to the meaning of its
terms.” Beam v. Wausau Ins. Co., 765 N.E.2d 524, 528 (Ind. 2002), reh’g denied.
“Rules of contract construction and extrinsic evidence may be employed in
giving effect to the parties’ reasonable expectations.” Johnson v. Johnson, 920
N.E.2d 253, 256 (Ind. 2010). “When a contract’s terms are ambiguous or
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uncertain and its interpretation requires extrinsic evidence, its construction is a
matter for the factfinder.” Id. “An ambiguous contract will be construed
against the party who drafted it.” Boswell Grain & Elevator, Inc. v. Kentland
Elevator & Supply, Inc., 593 N.E.2d 1224, 1227 (Ind. Ct. App. 1992). Whenever
summary judgment is granted based upon the construction of a written
contract, the trial court has either determined as a matter of law that the
contract is not ambiguous or uncertain, or the contract ambiguity, if one exists,
can be resolved without the aid of a factual determination. Mid State Bank v. 84
Lumber Co., 629 N.E.2d 909, 914 (Ind. Ct. App. 1994).
[17] CAPT argues that the trial court erred by (A) granting summary judgment to
SMMC on Count I of SMMC’s complaint by improperly interpreting Section
6.3 of the Agreement addressing reconciliation; (B) denying CAPT’s motion for
summary judgment with respect to Count II of its counterclaim dealing with
SMMC’s failure to reimburse locum tenens costs; and (C) denying CAPT’s
motion for summary judgment with respect to Count III of its counterclaim
which alleged that SMMC breached the non-solicitation provision of the
Agreement.
A. Reconciliation
[18] CAPT argues that the trial court misinterpreted Section 6.3 by concluding that
shortfalls carry over from year to year. CAPT points to the following portion of
Section 6.3(b)(3):
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The accounting reconciliation for the fourth (4th) quarter of each of
the three (3) years of the initial term of this Agreement shall serve as
the annual reconciliation, such that at the conclusion of each year of
the initial term, a full and complete reconciliation for such year shall
be achieved as provided in this subsection. Final reconciliation shall
occur at the end of the three (3) year term.
Appellant’s Appendix at 155. CAPT asserts that the foregoing language in
Section 6.3(b)(3) demonstrates that “the parties intended that each contract year
stand on its own, such that the reconciliation at the end of each year was the
final reconciliation for that year, with any shortfall not carrying over from year
to year.” Appellant’s Brief at 17. CAPT argues that the trial court’s decision
completely disregards and renders meaningless the explicit agreement that the
reconciliation for the fourth quarter of each year shall serve as the annual
reconciliation. It argues that “[i]f shortfalls are intended to carry over from year
to year, it makes no sense to say that an annual reconciliation is ‘full and
complete.’” Id. at 19. CAPT asserts that the trial court was mistaken in
believing that, if there is no carry over in reconciliations from year to year, there
would be no reason to provide for a “final reconciliation” and overlooked the
fact that there is almost always a time lag between the date anesthesia services
are rendered and the date payment is finally received from an insurance carrier,
Medicare, Medicaid, or an individual patient. Id. It asserts that “[t]he purpose
of the reference to a ‘final reconciliation’ at the end of the three year term was
to clearly confirm that there was no expectation that there could be yet another
reconciliation for the money which would continue to come in from accounts
receivable after the end of the three year term.” Id. at 19-20.
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[19] SMMC argues that the Agreement unambiguously provides for four types of
reconciliations: monthly, quarterly, annual, and a final reconciliation. SMMC
argues that CAPT’s position “that ‘final’ essentially means ‘for the last year’
must be rejected outright, as it would render the term ‘final’ meaningless.”
Appellee’s Brief at 14. In other words, SMMC contends that the “final
reconciliation” would be the same as the last annual reconciliation under
CAPT’s interpretation. Id. SMMC asserts that CAPT’s actual cash collections
exceed the amounts it repaid by at least $563,000 and that if CAPT is not
required to repay the amount of the overage, CAPT’s payment for
anesthesiology services will be $563,000 more than its actual collections
because it was prepaid that money and did not have to pay it back. SMMC
argues that the parties’ conduct is consistent with the trial court’s and SMMC’s
interpretation of “final reconciliation.” Id. at 16. SMMC asserts that CAPT
asks this court to interpret the contract to read out the term “final
reconciliation” so that CAPT does not have to repay amounts that accrued in
shortages in year one based on surpluses in years two or three. Id. at 19.
[20] Paragraph 6.3 of the Agreement is titled “Compensation” and provides:
(a) Compensation for Anesthesiology Services. [CAPT’s] actual
cash collections for the Anesthesiology Services provided by
[CAPT] and the Physicians hereunder net of any refunds
(“Collections”), shall (subject to the guarantee and
reconciliation provisions in Section 6.3(b) below), constitute the
full and complete payment for all Anesthesiology Services.
(b) Guarantee and Reconciliation.
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(1) It is the intention of the parties that [CAPT] generate
sufficient revenues from the Anesthesiology Services so
as not to require any income subsidization by [SMMC];
however, due to many factors beyond the control of both
[SMMC] and [CAPT] (such as the level of coverage
required pursuant to this Agreement, the level of
uninsured and underinsured patients presenting at
[SMMC] whom both [SMMC] and [CAPT] must treat
pursuant to this Agreement, and the necessity of
complying with controlling provisions of federal law and
regulations requiring that certain medical and hospital
treatment be provided without regard to a patient’s
ability to pay, among others), the parties understand that
the Anesthesiology Services provided by [CAPT]
pursuant to this Agreement may not from time to time
generate sufficient revenue to cover the provision of such
Anesthesiology Services as mandated by this
Agreement.
(2) Consequently, on the Commencement Date and on the
first day of each month during the first three (3) years
following the Commencement Date, [SMMC] shall pay
[CAPT] the sum of $175,000.00 (the “Monthly Income
Guarantee Amount”) as payment for the Anesthesiology
Services provided hereunder (subject to adjustment as
provided in the remainder of this Section 6.3(b)). On or
before the fifteenth (15th) day of each month during the
first three (3) years following the Commencement Date,
[CAPT] shall remit to [SMMC] all of its Net
Anesthesiology Collections (defined below) received in
the immediately prior month, up to (but not exceeding)
the Monthly Income Guarantee Amount. For purposes
of this Section 6.3(b), Net Anesthesiology Collections
shall mean Collections less any amounts due or paid by
[CAPT] to its billing company, up to a maximum of ten
percent (10%) of Collections, but shall not include (i)
any Monthly Income Guarantee or any other payments
due or paid by [SMMC] to [CAPT], or (ii) any
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collections due or received by [CAPT] for the
professional component of pain management services
rendered by Physicians. Any shortfall between
[CAPT’s] Net Anesthesiology Collections and the
Monthly Income Guarantee Amount paid by [SMMC]
shall be repaid to [SMMC] by [CAPT] (if at all) in
accordance with subsections (3), below.
(3) The annual income guarantee for such initial term shall
be $2,100,000, payable by [SMMC] to [CAPT] as
provided in this Section 6.3(b). Within forty-five (45)
days following the end of each contract quarter during
each of the three (3) years of the initial term of this
Agreement, the parties shall complete an accounting
reconciliation of [CAPT’s] Net Anesthesiology
Collections and compare such Net Anesthesiology
Collections for the most recently ended contract quarter
to the quarterly guaranteed net collections amount of
$525,000 (the “Quarterly Income Guarantee Amount”).
If [CAPT’s] Net Anesthesiology Collections exceed the
Quarterly Income Guarantee Amount, and if [SMMC]
has accrued any shortfall amounts (as described in
subsections (2), above), then [CAPT] shall pay [SMMC]
within fifteen (15) calendar days of the completion of
such reconciliation the aggregate of all such shortfall
amounts, up to the amount by which [CAPT’s] actual
Net Anesthesiology Collections exceeds the Quarterly
Income Guarantee Amount for such contract quarter.
The accounting reconciliation for the fourth (4th)
quarter of each of the three (3) years of the initial term of
this Agreement shall serve as the annual reconciliation,
such that at the conclusion of each year of the initial
term, a full and complete reconciliation for such year
shall be achieved as provided in this subsection. Final
reconciliation shall occur at the end of the three (3) year
term.
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(c) Audit of Books and Records. Upon reasonable notice,
[SMMC] shall have the right to inspect, audit, and make
extracts or copies from [CAPT’s] books and records during
normal business hours in order to verify the relevant
Collections and Net Anesthesiology Collections as described
herein. [CAPT] shall maintain such books and records for the
period of five (5) years from the termination of this Agreement.
Appellant’s Appendix at 154-155.
[21] Section 6.3(b)(3) mentioned both an “annual reconciliation” and a “[f]inal
reconciliation.” Id. at 155. The trial court construed the Agreement to avoid a
redundancy. Specifically, the trial court found:
[T]he Court hereby finds that this provision provided for four types of
reconciliation-monthly, quarterly, annual and final. To accept
CAPT’s position that the “final reconciliation” is the last annual
reconciliation would render “final” redundant in light of the annual
reconciliations and would also render some provisions of the Section
meaningless. CAPT’s interpretation is inconsistent with the
Agreement, which provided that “a full and complete reconciliation”
shall be achieved for each year at the annual reconciliation. If, as
CAPT contends, there is no carry over in reconciliations from year to
year, there would also be no reason to provide for a final
reconciliation, as the annual reconciliation provision cited herein
ensures that each year is reconciled.
Id. at 20. As noted, courts should interpret a contract so as to harmonize its
provisions, rather than place them in conflict, and we make all attempts to
construe the language of a contract so as not to render any words, phrases, or
terms ineffective or meaningless. To the extent that CAPT argues that the
court’s interpretation rendered meaningless the “full and complete” language
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describing the annual reconciliation, we observe that the statement addressing
annual reconciliations states:
The accounting reconciliation for the fourth (4th) quarter of each of
the three (3) years of the initial term of this Agreement shall serve as
the annual reconciliation, such that at the conclusion of each year of
the initial term, a full and complete reconciliation for such year shall be
achieved as provided in this subsection.
Id. at 155 (emphasis added). The language “full and complete reconciliation”
describes the reconciliation for each individual year and does not include prior
years. This interpretation is favored because it does not render the last sentence
of Section 6.3(b)(3) mentioning a “[f]inal reconciliation” superfluous. A final
reconciliation which is not duplicative of the annual reconciliations addresses
possible shortfalls not already addressed during the three-year term of the
Agreement. This interpretation is consistent with Section 6.3(b)(2), which
states in part: “Any shortfall between [CAPT’s] Net Anesthesiology Collections
and the Monthly Income Guarantee Amount paid by [SMMC] shall be repaid
to [SMMC] by [CAPT] (if at all) in accordance with subsections (3), below.”
Id. (emphasis added). The trial court did not err in entering summary judgment
in favor of SMMC on this issue.
B. Locum Tenens Physicians
[22] CAPT argues that, “[b]ecause there is no dispute about the fact that Doctor G
was a problematic physician, and no dispute about the accuracy of [the
accounting of locum tenens expenses], CAPT should have been granted
summary judgment on this issue.” Appellant’s Brief at 21. CAPT argues that
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Dr. G was the cause of staffing, quality, and risk management problems before
CAPT ever became involved with SMMC, and that the difficulties Dr. G
caused were the very reason SMMC was looking for a new anesthesia service
provider in 2006. CAPT asserts that Dr. G.’s last day at the hospital was to be
June 13, 2008, and the date of his removal came well after the date of his letter
of resignation, which was April 14, 2008, and that the only requirement for it to
have a right of reimbursement for locum tenens expenses is a request by SMMC
for the removal of a physician pursuant to Section 8.4. CAPT seeks
reimbursements of the locum tenens expenses it incurred as a result of the
removal of Dr. G.
[23] SMMC argues that CAPT had to replace Dr. G regardless of SMMC’s belated
request to remove him because Dr. G had already tendered his letter of
resignation. SMMC contends that Section 3.12 provides SMMC is responsible
for fifty percent of the cost of locum tenens physicians “if they occurred ‘upon the
[SMMC’s] request to remove per Section 8.4’ and ‘if a mutually agreeable and
reasonable amount of time is not provided’ to replace such a physician.”
Appellee’s Brief at 21. SMMC argues that CAPT fails to meet either condition
and that the portions of the record cited by CAPT show only that the costs were
for one locum physician, not that they were for Dr. G. SMMC contends that
“providing locum coverage for just Dr. G could not have been a cause of
additional expenses that SMMC was supposed to bear under the contract, as
even with such locum coverage, SMMC [sic] was still short-staffed.” Id. at 22.
SMMC argues that CAPT advised SMMC as to Dr. G’s resignation on March
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25, 2008, and CAPT assured SMMC that it had already been in contact with
several well-qualified anesthesiologists regarding the position and that it would
continue to provide satisfactory anesthesia services to SMMC. Without
citation to the record, SMMC argues that “[a]t no point did CAPT advise
SMMC that its request for removal was not reasonable or that it did not agree
with the timeframe or removal for replacement.” Id. SMMC contends that
“CAPT’s failure to complain about the request to remove Dr. G (after he had
already resigned) should be construed as an implicit consent or waiver of any
ability to contest the timeliness of the replacement of Dr. G.” Id. at 23. SMMC
also contends that CAPT breached the agreement first because it failed to
adequately staff SMMC and did not provide SMMC with four physicians
during the majority of the term of the Agreement. In its reply brief, CAPT
asserts that it always had four physicians available for the practice, and any
claim that a failure by CAPT to provide adequate staffing was released by the
Termination Agreement.
[24] Section 3.12 of the Agreement is titled “Locum Tenens Physicians” and
provides:
For the first three (3) months of this Agreement, or at any time upon
[SMMC’s] request to remove a Physician per Section 8.4 if a mutually
agreeable and reasonable amount of time is not provided to replace
such Physician, it may be necessary for [CAPT] to retain one or more
locum tenens physicians specializing in the practice of Anestbesiology
[sic] (the “Locum Tenens Physician”) to provide Anesthesiology
Services. In such a case, [SMMC] shall reimburse [CAPT] for fifty
percent (50%) of all direct and indirect costs of each and every Locum
Tenens Physician incurred by [CAPT], upon receipt of a written
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invoice for those costs.
Appellant’s Appendix at 149.
[25] Paragraph 8.4 of the Agreement is titled “Termination of an Individual
Physician” and provides:
In the event that any Physician commits a material breach of the terms
of this Agreement, [SMMC] shall provide notice to [CAPT], who shall
have the right to investigate and remedy any deficiencies within thirty
(30) days. [CAPT] agrees to remove a problematic physician upon the
request of the Hospital Administrator. [CAPT] also shall have the
right to remove a Physician and substitute additional Physician’s [sic]
as required to meet [SMMC’s] need. Termination of such Physician
shall constitute a cure of the alleged breach for the purposes of Section
8.3(b) above.
Id. at 158.
[26] The designated evidence reveals that SMMC requested that CAPT remove Dr.
G. on May 18, 2007, but later withdrew the request on July 19, 2007. In an
email dated March 25, 2008, Dr. Ramani informed Ryba, an administrator of
SMMC, that Dr. G resigned his position as an anesthesiologist at SMMC and
that Dr. G informed CAPT that his last date of service would be June 13, 2008.
In a letter dated April 14, 2008, Dr. G wrote Dr. Devanathan, the chairperson
of the Medical Executive Committee at SMMC, and the Executive Committee,
stating: “Effective April 1, 2008, I am tendering my resignation as Chairman of
the Department of Anesthesia at [SMMC] for personal reasons.” Id. at 241. In
a letter dated April 18, 2008, SMMC requested Dr. G’s removal and
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acknowledged that a “reasonable period of time may be necessary for an
appropriate transition of services as mutually agreed by the parties.” Id. at 242.
[27] Given that by the time SMMC sent its April 18, 2008 letter Dr. G had already
informed CAPT that he resigned his position as anesthesiologist at SMMC and
that his last day of service would be June 13, 2008; that SMMC did not request
that Dr. G be removed earlier than June 13, 2008; and that SMMC
acknowledged a reasonable period of time may be necessary for an appropriate
transition, we conclude that the designated evidence does not demonstrate a
question of fact as to whether costs were incurred as the result of SMMC’s
request for removal of Dr. G. Accordingly, we affirm the trial court’s grant of
SMMC’s motion for summary judgment with respect to Count II of CAPT’s
counterclaim.
C. Non-solicitation
[28] CAPT observes that the Termination Agreement conditioned SMMC’s release
from the non-solicitation provision of the Agreement on both full compliance
with its final reconciliation obligations and also payment of all locum tenens
expenses. CAPT argues that if the trial court erred in its resolution of either the
reconciliation or locum tenens issue, then it is entitled to summary judgment on
its claim for liquidated damages under the non-solicitation provision of the
agreement. Because we conclude that the trial court did not err in entering
summary judgment in favor of SMMC on the reconciliation issue and locum
tenens issue, we conclude that the provision in the Termination Agreement in
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which CAPT agreed to release Dr. Seshadri in exchange for SMMC paying
CAPT $100,000 is enforceable.5 Thus, we cannot say that the trial court erred
in granting summary judgment to SMMC on this issue.
Conclusion
[29] For the foregoing reasons, we affirm the trial court’s order.
[30] Affirmed.
Barnes, J., and Bradford, J., concur.
5
We note that the trial court’s order found that “[p]ursuant to the Termination Agreement, [SMMC] paid
CAPT $100,000 to release CAPT’s remaining employed anesthesiologist from the non-solicitation clause
contained in the initial Agreement.” Appellant’s Appendix at 18. CAPT concedes in its brief that SMMC
has already paid $100,000 following the execution of the Termination Agreement for the solicitation, hiring,
or retention of Dr. Seshadri.
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