No. 87-282
I N THE SUPREME COURT OF THE STATE OF MONTANA
1988
STATE MEDICAL OXYGEN & SUPPLY,
INC., a Montana corp.,
Plaintiff and Appellant,
-vs-
AMERICAN MEDICAL OXYGEN CO., a
Montana corp., J.C. LYNDES, GARY
GOMEZ, RONALD WRIGHT, JAMES LINK,
LYLE FATZ and ANNA TOPE,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable John McCarvel, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Keller & German; Robert S. Keller argued, Kalispell,
Montana
For Respondent :
Moses Law Firm; Michael Moses argued, Billings, Montana
Philip McGimpsey argued, Billings, Montana
Submitted: February 11, 1988
Decided: March 1 , 1988
Filed: MAR 1 - 1988
Clerk
Mr. Justice William E. Hunt, Sr. , delivered the Opinion of
the Court.
Plaintiff, State Medical Oxygen & Supply, Inc. (State
Med.) appeals from an order of the Eighth Judicial District,
Cascade County, granting summary judgment in favor of
defendants, American Medical Oxygen Co. (American Med. ) .
State Med. brought this action to recover damages from its
ex-employee, James Link, and the directors of American Med.
for the alleged breach of an employment contract pursuant to
5 1877(b) of the Social Security Act, 42 U.S.C. S 1395(nn).
Summary judgment for American Med. was granted on the grounds
that a Federal Social Securities Act violation does not give
rise to a private civil cause of action.
While we affirm the summary judgment granted on the
grounds that a Federal Social Securities Act violation does
not give rise to a private civil cause of action in this case
we reverse and remand for reasons set forth in this opinion.
Affirmed in part, reversed in part and remanded with
instructions.
The main issue presented for our review upon appeal is
whether the District Court erred in granting summary judgment
in favor of the defendants. Subissues raised by the parties
are as follows:
1. Does an alleged violation of 5 1877(b) of the Social
Security Act, 42 U.S.C. S 1395(nn) give rise to a private
cause of action under 5 27-1-202, MCA?
2. Did the court err in deciding the motion for summary
judgment prior to receiving the depositions of three material
witnesses?
3. Were the restrictive covenants contained in the
employment agreement between the defendant, James Link, and
plaintiff sufficient to give rise to a claim upon which
relief could be granted, or were they void as against public
policy, and unenforceable as a matter of law?
Plaintiff (State Med.) and defendant (American Med.) are
Montana corporations engaged in the business of supplying
oxygen and allied health care to patients in their homes and
in hospitals. Defendants Lyndes, Gomez and Wright were the
sole directors and stockholders of American Med. Defendants
Link, Fatz and Tope were employees of State Med. until August
9, 1985, when they became employees of American Med.
Defendants Fatz and Tope were dismissed as parties prior t.o
the filing of this appeal.
State Med.'s principal place of business is Kalispell,
but it had offices in Missoula, Billings, Butte, Great Falls,
Bozeman and Havre. To deliver supplies to patients, a route
driver based out of one of the company's branch offices,
delivers the product along a prescribed route of customers.
Typically, within the industry, customers follow the route
driver and buy services from the company for which the drlver
i
works.
Link, Fatz and Tope were unhappy with their jobs with
State Med. Link contacted American Med. about quitting his
job with State Med. and starting employment with American
Med. On August 9, 1985, the three State Med. employees quit
their jobs and immediately began work for American Med. When
Link left State Med.'s employ and went to work for American
Med., he memorized his customer route. He offered his
customers an opportunity to switch to American Med. and most
of his regular patients switched from State to American Med.
as their health care provider. Prior to that time, American
Med. did not have an office in Great Falls, with few patients
in that area.
The testimony showed that the American Med. directors
met with Link, Tope and Fatz prior to their job switch to
plan the opening of an American Med. office in Great Falls.
Fatz and Link, the State Med. route drivers, estimated the
necessary equipment which would be needed by American Med. in
Great Falls to open an office which could accommodate their
State Med. patients' needs, assuming the patients would
transfer their health care to American Med.
On Friday morning, August 9, 1985, at 8:00 a.m., Link
and Fatz quit their jobs with State Med. Tope had given
prior notice of her intent to quit. All three immediately
went to work for American Med. at American Med. 's newly
opened Great Falls office. Link testified that although he
had just begun working for American Med., on August 9, 1985,
he followed by memory the same patient route as he had driven
while employed by State Med. On his first day on the job for
American Med., he asked his former patients whether they
wanted to go with American Med. as their health care
provider. He took along forms for them to sign. Link
testified that he also had an advertisement placed in the
local paper requesting that former patients of his (and the
other former State Med. employees) contact them at the new,
American Med. office. A large number of State Med.'s former
patients switched to American Med. as their health care
provider as a result of this employee job switch.
To determine if summary judgment was properly granted,
we will first discuss appellant's contention that respondents
violated S 27-1-202, MCA, by violating S 1877(b) of the
Social Security Act.
Section 27-1-202, MCA, states that " [elvery person who
suffers detriment from the unlawful act or omission of
another may recover from the person in fault a compensation
therefor in money, which is called damages." Section 1877(b)
of the Social Security Act, 42 U.S.C. S 1395(nn) states in
relevant part:
(b) (1) Whoever knowingly and willfully solicits or
receives any remuneration (including any kickback,
bribe, or rebate) directly or indirectly, overtly
or covertly, in cash or in kind--
(A) In return for referring - individual to
an
- person - - furnishing or arranging for
a for the
the furnishinq of any - e m o r service for
it -
which payment Kbe - - - in whole - - part
made or in
under this title,
... shall be guilty of a felony ...
(2) Whoever knowingly and willfully offers or gays
any remuneration (including any kickback, bribe, or
rebate) directly or indirectly, overtly or -
covertly, in cash or in kind - any person to
to
induce such person--
(A) - refer an individual - - person -
to to a for
the furnishings or arrangin for the
G n i s h i n g of g - -or servize f F w h m
iFem
payment m a y b e - - in whole - -- part under
- made or in
this subchapter,
... shall be guilty of a felony ...
(3) Paragraphs (1) and (2) shall not apply to--
(A) ...
(B) any amount paid by an employer to an
employee (who has a bona fide employment
relationship with such employer) for
employment in the provision of covered items
or services. (Emphasis added.)
Appellant contends that when a route driver in this
business asks a competitor for a job, he is impliedly
offering patients to that competitor, and when a competitor
offers a job to a route driver, he is offering to buy
patients. Further, appellant asserts that the offer of the
job is the "remuneration" found in the Social Security Act.
See U.S. v. Greber (3d Cir. 1985), 760 ~ . 2 d68, 71-72.
Since a large number of the Great Falls area State Med.
customers are Medicare and/or Medicaid patients, appellant
claims that this business practice falls within the Social
Security statute. Appellant then extends its argument,
stating that a civil complaint for damages can be based on an
alleged violation of a criminal section in the federal Social
Security statutes, citing Conway v. oni id ah Trust Co. (1913),
47 Mont. 269, 132 P. 26.
In summary, appellant claims that it is not asserting a
federal claim, but a claim under § 27-1-202, MCA, and that a
breach of a federal statute comes within the context of the
Montana statute.
We cannot agree with this argument.
The Social Security Act, 42 U.S.C. S 1395(nn), was
enacted for the benefit of recipients of medical care
benefits, not for the benefit of a health care provider. See
Home Health Care Services, Inc. v. Currie (D. S.C. 19821, 531
F.Supp. 476. Further, a private cause of action is not
available to appellant through an alleged violation of a
federal statute unless certain criteria are met:
First, is the plaintiff "one of the class for whose
especial benefit the statute was enacted," . ..
that is, does the statute create a federal right in
favor of the plaintiff? Second, is there any
indication of legislative intent, explicit or
implicit, either to create such a remedy or to deny
one? ... Third, is it consistent with the
underlying purposes of the legislative scheme to
imply such a remedy for the plaintiff? ... And
finally, is the cause of action one traditionally
relegated to state law, in an area basically the
concern of the States, so that it would be
inappropriate to infer a cause of action based
solely on federal law?
Cort v. Ash (1975), 422 U.S. 66, 78, 95 S.Ct. 2080, 2088, 45
L.Ed.2d 26, 36. We conclude that the plaintiff is not of the
class for whom this act was enacted and therefore hold that,
as to the issue of a violation of the Social Security Act
giving rise to a private cause of action pursuant to 5
27-1-202, MCA, summary judgment was properly granted in favor
of respondents.
We now turn to the issue of whether the District Court
erred in granting American Med.'s motion for summary judgment
prior to receiving the depositions of three material
witnesses.
The depositions of Link, Fatz and Tope were taken either
on the morning of, or the morning before the hearing for
summary judgment on the issue addressed above. At that
point, the depositions had not been transcribed for the
court's review. Counsel for appellant State Med. agreed at
that hearing that he did not need more discovery, but did not
waive the introduction and consideration of those depositions
as relevant to the issue of summary judgment.
As to the issue of the applicability of the federal
statute, the depositions were not relevant. However, they
are relevant in consideration of a claim of tortious
interference. Upon reviewing the transcript of this hearing,
we note the following conversation between counsel for
appellant and the court.
THE COURT: You are maintaining your action--civil
action on that statute alone? [Federal statute]
MR. KELLER: No, but I don't want to be done with
that.
THE COURT: I know that. What was your other
basis?
MR. KELLER: We think there is a tortious
interference rationale in the interference with the
contractual relationship that these employees have
with State Medical. We think there is a breach of
a covenant of good faith and fair dealing of
existing employment relationship that was by the
employees that made their plans over a period of
time with the defendant corporation and its
officers--
THE COURT: Even if he were successful in that
interpretation of the statute, you still wouldn't
be out, you'd still have that action based on the
covenant of good faith and fair dealing.
MR. KELLER: That we clearly have.
MR. MOSES: Not against the corporation or the
directors.
MR. KELLER: There would be the tortious
interference.
MR. MOSES: Tortious interference has not been pled
or alleged against the corporation or the three
directors.
THE COURT: It's alleged against these employees?
MR. KELLER: As against the employees we have
alleged a breach of the federal statute, and we
have alleged a breach of covenant of good faith and
fair dealing.
As against the corporation and its directors, we
have alleged solely a breach of the federal
statute.
Although counsel for appellants makes this comment, an
examination of the complaint shows that appellants did plead
the elements of tortious interference against all of the
defendants. Furthermore, the record shows disputed issues of
material fact which may prove tortious interference by the
corporation, American Med. and its directors.
This court agreeing with the Restatement (Second) of
Torts 5 767 defined the tort of intentional interference in
Bolz v. Myers (1982), 200 Mont. 286, 651 ~ . 2 d606. The court
said that the factors to be considered are:
. .
. (a) the nature of the actor's conduct; (b) the
actor's motive; (c) the interests of the other with
which the actor's conduct interferes; (d) the
interest sought to be advanced by the actor; (e)
the social interests in protecting the freedom of
action of the actor and the contractual interest of
the other; (f) the proximity or remoteness of the
actor's conduct to the interference; and (g) the
relations between the parties.
In order to establish a prima facie case of
interference with contractual or business
relations, it must be shown that the acts (1) were
intentional and willful, (2) were calculated to
cause damage to the plaintiff in his or her
business, (3) were done with the unlawful purpose
of causing damage or loss, without right or
justifiable cause on the part of the actor, and (4)
that the actual damages and loss resulted.
(Citation omitted.)
Bolz, 651 P.2d at 610-611.
Montana Rules of Civil Procedure provide for liberal
interpretation of pleadings. Rule 8, M.R.Civ.P.:
Rule 8(a). Claims for relief. A pleading which
sets forth a claim for relief, whether an original
claim, counterclaim, cross-claim or third party
claim, shall contain (1) a short and plain
statement of the claim showing that the pleader is
entitled to relief, and (2) a demand for judgment
for the relief to which he deems himself entitled.
Relief in the alternative or of several different
types may be demanded.
Rule 8(e). Pleading - - concise and direct--
to be
consistency. (1) Each averment of a pleading
shall be simple, concise and direct. No technical
forms of pleadings or motion are required.
Rule 8(f). Construction of pleadings. All
pleadings shall be so construed as to do
substantial justice.
As we said in Morse v. Espeland (Mont. 1985), 696 P.2d 428,
Montana no longer requires strict compliance with
terms of art and legal phraseology when pleading a
cause of action. The archaic rules of code
pleading have been replaced by our new rules of
civil procedure, which place the spirit of the law
above strict compliance with the letter of the
law.. . .
Assuming appellant's position to be true, which for
purposes of reviewing this summary judgment we
must, we then proceed to determine whether an
action at law is cognizable. We find the essence
of a claim has been pleaded though not artfully
described.
Morse, 696 P.2d at 430. See also, Fode v. Farmers Ins.
Exchange (Mont. 1386), 719 P.2d 414, 416, 43 St.Rep. 814,
816-817.
Rule 15 (a) and 15(b) of the Montana Rules of Civil
Procedure also require liberality in the allowance of amended
pleadings "when justice so requires."
We hold that the court should have considered the
depositions of the three material witnesses before granting
summary judgment on all issues. We reverse with leave to
appellant to amend or supplement its pleadings.
The last issue raised by defendant Link which pertains
to the restrictive covenant contained in Link's employment
contract with State Med. has not been ruled upon by the
District Court and need not be addressed by this Court at
this time.
Affirmed in part, reversed in part and remanded for
/
further proceedings in accordance
We Concur: