Saint Alphonsus Diversified Care, Inc. v. Mri Assocs., LLP.

• Decision Date: 04 August 2014
• Docket Number: No. 40012–2012.,40012–2012.
• Citation: 334 P.3d 780
• Court: Idaho Supreme Court
• Parties: SAINT ALPHONSUS DIVERSIFIED CARE, INC., an Idaho nonprofit corporation, Plaintiff–Appellant, v. MRI ASSOCIATES, LLP., an Idaho limited liability partnership, Defendant–Respondent. MRI Associates, LLP, an Idaho limited liability partnership; MRI Limited, an Idaho limited partnership; and MRI Mobile Limited, an Idaho limited partnership, Counterclaimants–Respondents, v. Saint Alphonsus Diversified Care, Inc., an Idaho nonprofit corporation, and Saint Alphonsus Regional Medical Center, an Idaho nonprofit corporation, Counterdefendants–Appellants.

334 P.3d 780

SAINT ALPHONSUS DIVERSIFIED CARE, INC., an Idaho nonprofit corporation, Plaintiff–Appellant,

v.MRI ASSOCIATES, LLP., an Idaho limited liability partnership, Defendant–Respondent.

MRI Associates, LLP, an Idaho limited liability partnership; MRI Limited, an Idaho limited partnership; and MRI Mobile Limited, an Idaho limited partnership, Counterclaimants–Respondents,

v.Saint Alphonsus Diversified Care, Inc., an Idaho nonprofit corporation, and Saint Alphonsus Regional Medical Center, an Idaho nonprofit corporation, Counterdefendants–Appellants.

No. 40012–2012.

Supreme Court of Idaho, Boise, February 2014 Term.

Aug. 4, 2014.

Affirmed. Donald B. Ayer, Jones Day, Washington, D.C., argued for appellant.

Wade L. Woodard, Andersen Banducci, PLLC, Boise, argued for respondents.

SUBSTITUTE OPINION.

THE COURT'S PRIOR OPINION DATED JUNE 17, 2014 IS HEREBY WITHDRAWN.

EISMANN, Justice.

This is an appeal out of Ada County by Saint Alphonsus Regional Medical Center from a jury verdict awarding damages totaling $52,084,513 against it for breach of contract and tortious conduct regarding MRI Associates, LLP, and its two limited partnerships that owned and operated magnetic resonance imaging scanners. The respondents also cross-appealed the $4.6 million judgment obtained by Saint Alphonsus. We affirm the judgment of the district court.

I.

Factual Background.

Saint Alphonsus Diversified Care, Inc.,¹ and others formed a general partnership named MRI Associates. Saint Alphonsus Regional Medical Center, Inc., a non-profit hospital, is the sole member of Saint Alphonsus Diversified Care, Inc., and for convenience both of those entities will be referred to as “Saint Alphonsus.” The parties executed a written partnership agreement that was effective on April 26, 1985. The primary purpose of the partnership was to acquire and operate diagnostic and therapeutic devices, equipment, and accessories, beginning with a magnetic resonance imaging (MRI) scanner. MRI Associates and others formed two limited partnerships. One was named MRI Limited Partnership, and it owned and operated an MRI scanner located on the hospital campus of Saint Alphonsus. That limited partnership will be called “MRI Center” herein. The other limited partnership was named MRI Mobile Limited Partnership, and it owned and operated mobile MRI scanners. It will be called “MRI Mobile” herein.

For decades, a group of radiologists known as Gem State Radiologists (“Radiologists”) had interpreted medical images pursuant to a contract that gave them the exclusive right to serve the radiological needs of patients of Saint Alphonsus. After the formation of MRI Associates, they interpreted MRI scans performed at MRI Center. In 1998, the Radiologists began planning to construct and operate an outpatient facility in Boise that was located away from the hospital. The proposed facility would provide a full range of medical imaging services, including MRI imaging. There were negotiations among the Radiologists, Saint Alphonsus, and MRI Associates to have one medical imaging entity, but those negotiations were unsuccessful. There was evidence that Saint Alphonsus was negotiating against MRI Associates with the Radiologists. On July 23, 1999, the Radiologists formed Intermountain Medical Imaging, LLC, (“IMI”), and on September 1, 1999, they opened their facility.

In 1998, Saint Alphonsus began negotiating with the Radiologists to partner with them in the imaging center. On July 1, 2001, Saint Alphonsus became a member of IMI. On June 3, 2002, IMI opened another facility in Meridian (“IMI Meridian”). Finally, on February 24, 2004, Saint Alphonsus gave notice to MRI Associates that it would dissociate from the partnership effective on April 1, 2004. Under the partnership agreement, upon dissociation Saint Alphonsus could not compete with MRI Associates for a period of one year.

On October 18, 2004, Saint Alphonsus filed this action seeking to recover the value of its partnership interest from MRI Associates, and MRI Associates responded by filing a multi-count counterclaim and claims against third parties. This case was assigned to Judge McLaughlin. The third-party claims were ultimately dismissed.

The jury found Saint Alphonsus liable on all causes of action, and MRI Associates was awarded a judgment in the sum of $36.3 million. That judgment was vacated on appeal, Saint Alphonsus Diversified Care, Inc. v. MRI Associates, LLP, 148 Idaho 479, 224 P.3d 1068 (2009), and the case was remanded for further proceedings. On remand, this case was assigned to Judge Wetherell. MRI Center and MRI Mobile were joined as counterclaimants. When referred to collectively, MRI Associates, MRI Center, and MRI Mobile will be called the “MRI Entities.”

The case was again tried to a jury. The district court submitted four claims for relief to the jury: breach of contract, intentional interference with a prospective economic advantage, breach of fiduciary duty, and civil conspiracy. The jury found in favor of the MRI Entities on each of the claims. Under the judgment entered by the district court, the awards under each claim for relief were in the alternative. The highest award to each of the MRI Entities was: $3,906,338 to MRI Associates; $25,828,208 to MRI Center; and $22,349,967 to MRI Mobile, which totaled $52,084,513. On its complaint, Saint Alphonsus was awarded $4.6 million against MRI Associates. Saint Alphonsus appealed, and the MRI Entities cross-appealed.

II.

SAINT ALPHONSUS'S ISSUES ON APPEAL

A.

Permitting joinder of MRI Center and MRI Mobile As Counterclaimants.

Saint Alphonsus commenced this action by suing MRI Associates to recover the value of its partnership interest. On May 20, 2005, MRI Associates filed a counterclaim seeking to recover damages for wrongful dissociation and breach of fiduciary duties. On March 7, 2006, MRI Associates filed an amended counterclaim adding, among others, a claim for intentional interference with prospective economic advantage. The damages being sought were primarily suffered by MRI Center and MRI Mobile. MRI Associates only received a management fee of 7.5% of the cash receipts from operations of the two limited partnerships. On December 20, 2006, MRI Associates filed a motion seeking leave to again amend its counterclaim to provide that it was suing on its own behalf and on behalf of the two limited partnerships. Saint Alphonsus objected on the ground that the two limited partnerships were distinct legal entities and that MRI Associates could not assert claims on their behalf. The motion was argued before Judge McLaughlin on January 11, 2007, and on February 6, 2007, he issued a decision granting the motion. He held that the motion was timely under the scheduling order and that MRI Associates as the general partner in the two limited partnerships could assert claims on their behalf. On March 2, 2007, MRI Associates filed its second amended counterclaim seeking to recover damages on behalf of the two limited partnerships.

On appeal, this Court held that MRI Associates could not assert claims belonging to the limited partnerships where those partnerships were not made parties to the lawsuit. Id. at 496–97, 224 P.3d at 1085–86. The remittitur was issued on January 13, 2010. After Judge Wetherell was appointed to preside over this case, he held a status conference with counsel for the parties on February 17, 2010. At that conference, he granted MRI Associates permission to amend its counterclaim, and on March 22, 2010, it filed its third amended counterclaim in which MRI Center and MRI Mobile were named as counterclaimants. On August 6, 2010, Saint Alphonsus moved for summary judgment dismissing the claims asserted by MRI Center and MRI Mobile on the ground that they were barred by the statute of limitations. That motion was heard on October 1, 2010. Judge Wetherell held, that under Rule 17(a) of the Idaho Rules of Civil Procedure, the amendment adding MRI Center and MRI Mobile related back to the filing of the second amended counterclaim. He found that MRI Associates had acted reasonably in relying upon the decision of Judge McLaughlin; that MRI Associates had moved to add the limited partnerships as parties within a reasonable time of learning of Judge McLaughlin's mistake; and that MRI Associates had filed its second amended counterclaim before the applicable statute of limitations had run.

MRI Associates was not the real party in interest for recovering the damages sustained by MRI Center and MRI Mobile. MRI Associates's damages would only be the loss of its management fees provided in the limited partnership agreements, which would be 7.5% of the damages recoverable by the limited partnerships. Rule 17(a) provides that the claims belonging to those parties would not be dismissed “until a reasonable time has been allowed after objection” for the joinder of the real party in interest and that such joinder “shall have the same effect as if the action had been commenced in the name of the real party in interest.” In Tingley v. Harrison, 125 Idaho 86, 867 P.2d 960 (1994), we held that relation back under Rule 17(a) requires: (a) that the joinder occur within a reasonable time after objection; (b) that there was a mistake in naming the original party; and (c) that the joinder was not made in part to circumvent the statute of limitations. Id. at 91–92, 867 P.2d at 965–66.

In Tingley, the plaintiff's personal injury action was dismissed due to the failure of his attorneys to prosecute the action. Id. at 88, 867 P.2d at 962. Shortly after learning of the dismissal, the plaintiff filed a petition pursuant to Chapter 7 of the Bankruptcy Reform Act, and he listed his malpractice claim in his petition. Id. In March 1987, he filed a malpractice action against his attorneys, which filing was after his cause of action would have been barred by the statute of limitations. Id. at 90, 867 P.2d at 964. On August 15, 1988, the...