Care Grp. Heart Hosp., LLC v. Sawyer

• Decision Date: 23 March 2018
• Docket Number: Supreme Court Case No. 49S05–1710–PL–671
• Citation: 93 N.E.3d 745
• Parties: The CARE GROUP HEART HOSPITAL, LLC, Appellant/Cross–Appellee (Defendant), v. Roderick J. SAWYER, M.D., Appellee/Cross–Appellant (Plaintiff).
• Court: Indiana Supreme Court

93 N.E.3d 745

The CARE GROUP HEART HOSPITAL, LLC, Appellant/Cross–Appellee (Defendant),

v.Roderick J. SAWYER, M.D., Appellee/Cross–Appellant (Plaintiff).

Supreme Court Case No. 49S05–1710–PL–671

Supreme Court of Indiana.

Argued: December 7, 2017

FILED March 23, 2018

ATTORNEYS FOR APPELLANT/CROSS–APPELLEE: John R. Maley, Peter J. Rusthoven, Leah L. Seigel, Barnes & Thornburg LLP, Indianapolis, Indiana

ATTORNEYS FOR PETITIONER ST. VINCENT MEDICAL GROUP, INC.: David B. Honig, Andrew B. Howk, Hall, Render, Killian, Heath & Lyman, P.C., Indianapolis, Indiana

ATTORNEYS FOR APPELLEE/CROSS–APPELLANT: Kevin W. Betz, Sandra L. Blevins, Betz + Blevins, Indianapolis, Indiana

ATTORNEYS FOR AMICUS CURIAE INDIANA LEGAL FOUNDATION INC.: Julia Blackwell Gelinas, Maggie L. Smith, Frost Brown Todd LLC, Indianapolis, Indiana

ATTORNEYS FOR AMICUS CURIAE DEFENSE TRIAL COUNSEL OF INDIANA: Philip E. Kalamaros, Hunt Suedhoff Kalamaros LLP, Saint Joseph, Michigan, Lucy R. Dollens, Quarles & Brady LLP, Indianapolis, Indiana

On Petition to Transfer from the Indiana Court of Appeals, No. 49A05–1603–PL–580

Rush, Chief Justice.

Parties are free to choose the terms of their agreements, and Indiana courts firmly defend this freedom of contract by enforcing agreed-upon terms.

Here, a doctor worked as a cardiologist and was also a member–owner of a hospital. He agreed with his employer and with the hospital that if his employment is "terminated for any reason"—that is, upon "any termination"—his ownership interest must be discontinued and redeemed.

We hold that "any termination" means just that—any termination, for any reason. The hospital thus did not breach the agreement by paying out the doctor's ownership interest after his employment terminated. It did, however, breach the agreement by delaying the payout, so the doctor is entitled to interest.

We also hold that the trial court did not abuse its discretion in awarding the doctor discovery sanctions of $27,233.19 in attorney fees and expenses.

We therefore affirm in part, reverse in part, and remand to the trial court.

Facts and Procedural History

Doctor Roderick Sawyer worked as a cardiologist for St. Vincent Medical Group, Inc. ("the Medical Group"). He was also a member–owner of The Care Group Heart Hospital, LLC ("the Hospital"). These two arrangements stood on three agreements: an employment agreement, an operating agreement, and a joinder agreement.

The employment agreement was between Dr. Sawyer and the Medical Group and governed his ten-year term of employment as a cardiologist. The operating agreement was between Dr. Sawyer and the Hospital and prescribed payout of his ownership interest in the Hospital. And the joinder agreement was among all three and conditioned Dr. Sawyer's continued ownership interest in the Hospital on his continued employment with the Medical Group. The joinder agreement specified,

[w]ithin ninety (90) days of any termination of employment between Physician and [the Medical Group] (other than a termination pursuant to Section 4.4(c) of the Agreement), ... Physician and [the Hospital] shall cause Physician to be redeemed of his interest in [the Hospital] such that, following such redemption, Physician shall have no continuing direct or indirect membership, ownership or investment interest in [the Hospital]. (emphases added)

The operating agreement then supplied a formula for calculating Dr. Sawyer's redemption amount at the time of his "involuntary withdrawal," which includes "the termination of employment or any material agreement [Dr. Sawyer] is a party to with the [Medical Group]."

The Medical Group terminated Dr. Sawyer's employment on July 22, 2011. Almost eight months later, the Hospital paid Dr. Sawyer $196,787—his redemption amount based on the operating agreement's formula.

Dr. Sawyer sued the Medical Group and the Hospital.¹ Against the Medical Group, he claimed tortious interference with business relationships; breach of the duty of good faith and fair dealing; and breach of the employment agreement, which caused him to lose both his employment and his ownership interest in the Hospital. Against the Hospital, he brought a breach-of-contract claim.

The Hospital filed dispositive motions throughout the litigation: for partial dismissal, for summary judgment, and for judgment on the evidence. Each motion relied on a plain reading of the joinder agreement, arguing no breach in the Hospital discontinuing and redeeming Dr. Sawyer's ownership interest. The trial court denied all these motions as to the joinder agreement, but it granted summary judgment to the Hospital as to the operating agreement. A jury returned a verdict against the Medical Group for $1.1 million, which has been paid to Dr. Sawyer. The jury also returned a verdict of $470,000 against the Hospital for breach of the joinder agreement.

The Hospital moved to correct error, reiterating that there was no breach in discontinuing and redeeming Dr. Sawyer's ownership interest—only in delaying the payout after the 90–day deadline. The Hospital asked the court to correct the jury's $470,000 award by entering judgment on the evidence for $6,559.60—the interest on the five-month delay at the statutory rate of eight percent. The court denied the Hospital's motion.

Finally, the court ruled on the last of many discovery disputes that tangled nearly every stage of the litigation. It ordered the Hospital and Medical Group to pay a $27,233.19 sanction award to Dr. Sawyer.

The Hospital appealed the $470,000 judgment, arguing that the trial court erred in denying the Hospital's motions under Indiana Trial Rules 12(B)(6), 50, and 59(J). Dr. Sawyer cross-appealed, arguing that the trial court erroneously granted summary judgment to the Hospital as to the operating agreement, and that the $27,233.19 in attorney fees and expenses was an inadequate sanction.

The Court of Appeals affirmed both the partial summary judgment for the Hospital and the judgment against the Hospital.² The Care Group Heart Hosp. v. Sawyer , 80 N.E.3d 190, 210 (Ind. Ct. App. 2017). But it reversed the sanction award, remanding for re-evaluation and re-apportionment among the defendants. Id.

The Hospital and the Medical Group separately petitioned to transfer. We granted transfer, vacating the Court of Appeals opinion. Ind. Appellate Rule 58(A).³

Standard of Review

We face two questions. First, did a contract-interpretation error—which we review de novo—pervade the trial court's rulings on the Hospital's dispositive motions? See State Farm Mut. Auto. Ins. Co. v. Jakubowicz , 56 N.E.3d 617, 619 (Ind. 2016).

Second, did the trial court abuse its discretion in awarding discovery sanctions of $27,233.19 to Dr. Sawyer? See McCullough v. Archbold Ladder Co. , 605 N.E.2d 175, 180 (Ind. 1993).

Discussion and Decision

We hold that under the plain meaning of the contract language, the Hospital did not breach the joinder agreement by discontinuing and redeeming Dr. Sawyer's ownership interest. We conclude, though, that the Hospital did breach the agreement by delaying the payout, so Dr. Sawyer is entitled to interest on the delay. Finally, we turn to the sanction award and find no abuse of discretion.

I. The Hospital breached the joinder agreement only by delaying Dr. Sawyer's payout.

The Hospital challenges the legal sufficiency of Dr. Sawyer's breach-of-contract claim. See Thornton v. State , 43 N.E.3d 585, 587 (Ind. 2015). The claim's legal sufficiency depends on our interpretation of the parties' contract.

Before interpreting the parties' contract, however, we address a threshold matter—whether the Hospital waived its contract-interpretation argument. Dr. Sawyer gives three arguments for finding waiver.

First, he asserts that the Hospital did not raise the argument in its motions for partial dismissal and for summary judgment. But the Hospital did, in fact, raise the argument in its motion for partial dismissal, asserting that the joinder agreement "call[s] for the mandatory redemption of Plaintiff's membership interest in [the Hospital] following Plaintiff's termination of employment with [the Medical Group]." The Hospital then relied on this plain reading of the joinder agreement in its later dispositive motions.

Dr. Sawyer also argues that the Hospital agreed to jury instructions on breach. But the Hospital did not need to object to the jury instructions to preserve its argument that the trial court erred in a contract-interpretation ruling that was outside the jury's purview. See, e.g. , City of St. Louis v. Praprotnik , 485 U.S. 112, 119–120, 108 S.Ct. 915, 99 L.Ed.2d 107 (1988) (finding no obstacle to review a challenge, without an objection to jury instructions, where the focus of the challenge was "not on the jury instruction itself, but on the denial of [the party's] motions for summary judgment and a directed verdict").

Finally, he argues that the Hospital waited until after the jury returned its verdict to assert that the Hospital's breach was limited to its untimely payment. But the Hospital did not have to concede breach in untimeliness to preserve its argument that, under a plain reading of the contract language, there was no breach for paying out Dr. Sawyer's ownership interest.

The Hospital thus has not waived its contract-interpretation argument, and we turn to its merits.

Our goal in contract interpretation is "to determine the intent of the parties at the time that they made the agreement." Citimortgage, Inc. v. Barabas , 975 N.E.2d 805, 813 (Ind. 2012). We start with the contract language to determine whether it is ambiguous. Ryan v. TCI Architects/Eng'rs/Contractors, Inc. , 72 N.E.3d 908, 914 (Ind. 2017). If the language is unambiguous, we give it its plain and ordinary meaning in view of the whole contract, without substitution or addition. See id. ; State v. Int'l Bus. Machs. Corp. , 51 N.E.3d 150, 160 (Ind. 2016).

A. The parties' agreed-upon terms are unambiguous.

The joinder agreement says:

WHEREAS, [the Medical Group] and the Physician [Dr. Sawyer] are

...