Bailey v. Rowan
| Decision Date | 17 September 1999 |
| Parties | Robert L. BAILEY, Jr., M.D., and the Surgical Group of Florence, P.C. v. Darren ROWAN, M.D. Darren Rowan, M.D. v. Robert L. Bailey, Jr., M.D., and the Surgical Group of Florence, P.C. |
| Court | Alabama Supreme Court |
Robert L. Gonce of Gonce, Young, Sibley & Moreau, Florence; and Jimmy H. Sandlin of Schuessler & Sandlin, Florence, for appellants/cross appellees Robert L. Bailey, Jr., M.D., and the Surgical Group of Florence, P.C.
J. Wilson Mitchell of Yates, Mitchell, Bernauer, Winborn & Morton, Florence, for appellee/cross appellant Darren Rowan, M.D.
Darren Rowan, M.D., sued Robert L. Bailey, Jr., M.D., and the Surgical Group of Florence, P.C. (collectively "Bailey"), alleging two counts of breach of contract and three counts of fraud, all in connection with an employment contract he had entered into with Bailey. The trial court entered a judgment as a matter of law in favor of Bailey on both breach-of-contract claims, but submitted the fraud claims to a jury. The jury returned a verdict in favor of Rowan on all three fraud claims, awarding him a total of $375,000 in compensatory damages and $150,000 in punitive damages. The trial court entered a judgment on that verdict, but in doing so reduced the punitive-damages award to $15,000. Because we hold that Rowan could not have justifiably1 relied on the alleged misrepresentations, we reverse and remand.
Rowan graduated from medical school in 1988 and began his residency at the University of South Alabama Medical Center. During Rowan's last year of residency, Bailey had several meetings with him. The purpose of these discussions was to persuade Rowan to become an associate of Bailey's medical practice in Florence. In February 1993, Rowan and Bailey met with representatives from Florence Hospital (the "hospital"), to sign a recruitment agreement. This agreement established the obligations of the hospital in the event Rowan became Bailey's associate. Under the agreement, the hospital agreed to lend the doctors $12,500 a month as a guarantee of Rowan's gross cash receipts. Under the agreement, no payment would be made in any month in which Rowan's cash receipts equaled or exceeded $12,500. The hospital also agreed to pay Rowan a total of $26,000 in moving and relocation expenses and to pay Bailey $1,800 a month toward the expense of employing an additional physician. At this meeting, Rowan says, he asked Bailey what would happen if he generated more revenue than was stated in the agreement. Rowan says Bailey told him that he had no intention of making money off Rowan and that Rowan could keep "[a]nything ... over what it takes to bring [him] up [to Florence]."
Several months later, Rowan received a proposed written employment contract from Bailey. That proposed contract provided in pertinent part:
(Emphasis added.)
Rowan thoroughly read the contract and discussed it with his family. Rowan asked Bailey about the language in the compensation clause. Rowan says Bailey told him that the bonus language was included so that "after a year there [would] be no buy-in to the corporation, [and that Rowan would] become a partner at that time." Rowan also asked Bailey why his compensation was listed as $125,000 rather than the $150,000 he had expected. He says Bailey told him that the $25,000 difference would be used to pay premiums for medical-malpractice insurance and that at the end of the year Rowan would receive any unused portion of that $25,000. In June 1993, Rowan signed the employment agreement.
Rowan moved to Florence and began practicing medicine as Bailey's associate. After several months, Rowan became dissatisfied and told Bailey that he was considering leaving. Although the plain language of the employment agreement provided that Rowan had to renew his employment contract for a second year in order to receive a bonus, Rowan alleges that Bailey told him that he would get a bonus regardless of whether he stayed for an additional year. In June 1994, Rowan notified Bailey that he would be leaving when his contract expired the following month. After he left, Rowan allegedly asked Bailey when he would get his bonus. Rowan says Bailey gave him a choice between getting an immediate check, based on the revenues actually collected from the first nine months and the estimated collection for the last three months, or waiting for a check based on the exact computation. Rowan says he opted to wait for the exact computation of collected revenues. After some time had passed, Rowan allegedly asked Bailey again for his bonus. According to Rowan, Bailey said that he did not owe Rowan anything and that any further inquiries should be directed to Bailey's attorney. Two weeks later, Rowan allegedly telephoned Bailey and asked him "why there had been a change of heart." Rowan says Bailey told him that he had never intended to pay Rowan a bonus and that "[t]he only reason [he] suggested it was that he had hoped that [Rowan] would change [his] mind and stay."
Rowan sued Bailey, alleging two counts of breach of contract and three counts of fraud, all in connection with the employment contract he had entered into with Bailey. Specifically, Rowan's contract claims alleged that Bailey had orally modified the employment contract so that the bonus would be paid regardless of whether Rowan stayed an additional year and so that Rowan would receive an additional $25,000, less the cost of medical-malpractice insurance. Rowan's fraud claims alleged (1) that Bailey had fraudulently represented that Rowan...
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