Carlson v. Arnot-Ogden Memorial Hosp.

• Citation: 918 F.2d 411
• Decision Date: 05 November 1990
• Docket Number: No. 90-1261,ARNOT-OGDEN,90-1261
• Parties: 117 Lab.Cas. P 56,459 CARLSON, David, Appellant, v.MEMORIAL HOSPITAL.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 411

918 F.2d 411

117 Lab.Cas. P 56,459

CARLSON, David, Appellant, v. ARNOT-OGDEN MEMORIAL HOSPITAL.

No. 90-1261.

United States Court of Appeals Third Circuit.

Argued Aug. 22, 1990.

Decided Nov. 5, 1990.

James D. Golkow (argued), Arthur A. Wolk, Catherine B. Slavin, Wolk, Genter & Harrington, Philadelphia, Pa., for appellant.

Peter J. Mooney (argued), White & Williams, Philadelphia, Pa., for appellee.

Before STAPLETON, COWEN and WEIS, Circuit Judges.

OPINION OF THE COURT

COWEN, Circuit Judge.

This diversity action arises from an employment dispute between Arnot-Ogden Memorial Hospital (the "hospital") and David Carlson, D.O. ("Dr. Carlson"). The hospital contracted to hire Dr. Carlson, but cancelled the contract when it discovered that he did not qualify in his specialty for staff privileges at their hospital. Dr. Carlson initiated this action, seeking relief under five causes of action, including breach of contract. The district court granted summary judgment in favor of the hospital on all five claims. With respect to the contract claim, the district court found that Dr. Carlson had not presented evidence sufficient to rebut the presumption of employment at-will. Because we find that the notice provision in the contract removes it from employment at-will and creates a contract for at least the length of the notice period, we will reverse the judgment of the district court on the contract claim, but affirm the district court with respect to all other claims.

I.

In 1987 the hospital, located in Elmira, New York, sought two primary care physicians, and retained a medical recruitment firm to assist its recruitment efforts. That firm contacted Dr. Carlson, a second-year resident osteopath at Suburban General Hospital in Norristown, Pennsylvania. Dr. Carlson traveled to New York and interviewed for a family practice position with several representatives of the hospital, including Vincent Derisio, M.D. and Robert Nowlan.

During the interview process, Nowlan gave Dr. Carlson a blank form employment contract as an explanation of some of the hospital's employment policies. Paragraph ten of that contract has particular significance to this case. It provides that "[t]his agreement shall ... continue until terminated by either party by ninety (90) days written notice to the other." App. at 503.

During his interview, Dr. Carlson informed Dr. Derisio that he had only two years of residency experience, and Dr. Derisio told him that he was qualified for staff privileges at the hospital. Dr. Derisio was wrong. As the parties later realized, a family practice physician must have three years of residency experience in order to qualify for staff privileges at the hospital.

On April 14, 1988, Nowlan telephoned Dr. Carlson and offered him the family practice position. Dr. Carlson accepted the offer by phone on April 18, 1988. Dr. Carlson traveled to New York and again met with Nowlan. At this time Nowlan gave Dr. Carlson a written employment contract identical to the form contract he had been given earlier, except that Dr. Carlson's name and proposed annual salary had been inserted. The parties agreed that Dr. Carlson was to begin work for the hospital on or about July 11, 1988. Dr. Carlson signed the employment contract and returned it to the hospital in early May. No representative of the hospital ever signed this written contract.

Dr. Carlson began his preparations to move to New York in early May. ¹ Around that time, Dr. Derisio realized that Dr. Carlson was not eligible for staff privileges at the hospital because he had only two years of residency experience. On May 11, Dr. Derisio called Dr. Carlson and informed him of the problem, effectively cancelling the employment relationship. The hospital tried to make arrangements with Dr. Carlson that would minimize his costs and inconvenience, but the parties were unable to reach an agreement. Dr. Carlson thereafter initiated this suit seeking relief under five causes of action: breach of contract, estoppel, fraud, negligence, and willful and wanton misconduct.

II.

The district court had jurisdiction pursuant to 28 U.S.C. Sec. 1332(a). In determining which state's law to apply, the district court applied the choice of law rules of Pennsylvania in accordance with Klaxon Co. v. Stentor Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941) (district court must apply choice of law rules of state in which it sits in diversity action). After evaluating the relative interests of New York and Pennsylvania in the outcome of this case, as required by Pennsylvania's choice of law rules, ² the court determined that this case should be decided under Pennsylvania law.

The district court granted the hospital's motion for summary judgment, dismissing all five counts of Dr. Carlson's complaint. We have jurisdiction to review that order pursuant to 28 U.S.C. Sec. 1291. Our review of a grant of summary judgment is plenary. Williams v. Borough of West Chester, 891 F.2d 458 (3d Cir.1989).

Summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). "Rule 56(c) mandates the entry of summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). In order to defeat a motion for summary judgment, "the nonmoving party must adduce more than a mere scintilla of evidence in its favor." Williams, 891 F.2d at 460.

III.

Dr. Carlson bases his breach of contract claim on the oral contract arising from Nowlan's offer of April 14, 1988, and his acceptance of April 18, 1988. The district court dismissed Dr. Carlson's contract claim because employment relationships in Pennsylvania are presumed to be at-will. The district court found that Dr. Carlson introduced no evidence that, if believed by the jury, would rebut the at-will presumption. We disagree with this conclusion. The district court did not consider the clause in the form contract that prohibits either party from terminating the employment relationship without giving the other ninety days notice. We read this provision to rebut the presumption of employment at-will and create an employment contract with a duration of at least ninety days beginning from the date Dr. Carlson was to start working for the hospital.

There is no dispute that the parties formed an oral contract to enter an employment relationship. ³ The terms of that employment relationship were to be governed by the form contract that Dr. Carlson was given in April and signed in early May. ⁴ Although no representative of the hospital ever signed this form, the hospital is bound by its terms as they define their oral contract. Contract construction, i.e. determining the legal effect of the terms of the contract, is a question of law for the court. Ram Constr. Co., Inc. v. American States Ins. Co., 749 F.2d 1049 (3d Cir.1984). The legal question on appeal is whether the clear terms of the contract between Dr. Carlson and the hospital rebut the presumption of employment at-will.

Pennsylvania courts have recognized the doctrine of employment at-will for almost a hundred years. See Darlington v. General Elec., 350 Pa.Super. 183, 188-89, 504 A.2d 306, 309 (1986) (tracing recognition of employment at-will doctrine in Pennsylvania to Henry v. Pittsburgh & Lake Erie R.R. Co., 139 Pa. 289, 21 A. 157 (1891)); Schoch v. First Fidelity Bancorporation, 912 F.2d 654 (3d Cir.1990). Under employment at-will, "employees may be discharged at any time, for any reason, or for no reason at all." Id. (emphasis added). In Pennsylvania, the at-will presumption can be overcome by a contract, either express or implied, that specifies the duration of employment. Veno v. Meredith, 357 Pa.Super. 85, 96, 515 A.2d 571, 577 (1986).

Here the contract provides that neither party can terminate the employment relationship without giving the other party ninety days notice. We read this provision to specify the duration of the contract as, at a minimum, ninety days. Read in this way, the notice provision removes the contract from the realm of employment at-will. This provision explicitly provides that the hospital cannot terminate Dr. Carlson's employment at any time. Such a notice provision is antithetical to the very definition of employment at-will. Darlington, 350 Pa.Super. at 188, 504 A.2d at 309; S. Williston, A Treatise on the Law of Contracts Sec. 1017 (3d ed. 1967) (Where an employment contract is at-will, there is no requirement of notice.). We hold that the ninety day notice provision in this contract removes it from employment at-will and specifies a minimum employment term of ninety days. ⁵

Dr. Carlson is entitled to the damages for breach of a ninety day contract. Although the hospital did not technically breach a ninety day contract, it did breach an oral contract to enter into an employment contract which was to contain a ninety day notice provision. We find that ninety days is the appropriate gauge of contract damages because, given the events that occurred in this case, it is both the minimum and maximum duration of the employment relationship. The plain language of the notice clause provides a minimum of ninety days of employment. Because Dr. Carlson was given effective notice before his employment actually began, ninety days is also the maximum duration of the contract. ⁶

In holding this is a contract for a minimum of ninety days, we reject Dr. Carlson's contention that the terms of the form contract define the duration of his employment as one year. Dr. Carlson points to two provisions of that contract: the clause specifying an annual salary and the clause incorporating by reference the hospital staff bylaws, which provide...