Franceschi v. Hospital General San Carlos
| Decision Date | 24 August 2005 |
| Docket Number | No. 04-2105.,No. 04-2104.,04-2104.,04-2105. |
| Citation | 420 F.3d 1 |
| Parties | Dr. Porfirio FRANCESCHI; Angela Castillo De Franchesci; Conjugal Partnership Franceschi-Castillo, Plaintiffs, Appellants/Cross-Appellees, v. HOSPITAL GENERAL SAN CARLOS, INC. and/or Hospital San Carlos, Inc. d/b/a Hospital San Carlos Borromeo, Defendant, Appellee/Cross-Appellant. |
| Court | U.S. Court of Appeals — First Circuit |
Raul Barrera Morales, with whom Hernandez Sanchez Law Firm was on brief, for appellant.
Myrta Estrella Nieves Blas, with whom Santos & Nieves Blas was on brief, for appellee.
Before LYNCH and LIPEZ, Circuit Judges, and BALDOCK,* Senior Circuit Judge.
Appellant Dr. Porfirio Franceschi, a physician, had a contract dispute with the hospital that employed him. The contract had an arbitration clause, and the parties attempted to select an arbitral panel. For various reasons, the arbitration never happened. Instead, the dispute was eventually tried to a jury, which returned a verdict for Dr. Franceschi on both contract damages and compensatory damages for emotional distress. On the hospital's motion for new trial or remittitur, the court substantially reduced the emotional damages award.
The appeal (by plaintiffs) and cross-appeal (by the hospital) raise a bevy of issues: (1) whether the case should have been dismissed in light of the arbitration clause, (2) whether the suit was untimely, (3) whether the court erred in reducing the emotional damages award, (4) whether the jury's economic damages award was excessive and should have been reduced, and (5) whether the jury's economic damages award was too low and should have been increased. We hold that the hospital forfeited its arbitration argument by failing to pursue an interlocutory appeal when that argument was first denied by the district court in a summary judgment ruling. The other issues also pose no obstacles to affirming the district court.
We recite the facts in the light most favorable to the jury's verdict, United States v. Castellini, 392 F.3d 35, 39 (1st Cir.2004), and present only those facts necessary to the disposition of this appeal.
Dr. Franceschi, a radiologist, was recruited from the Texas hospital where he worked to join Hospital San Carlos in Puerto Rico. His employment contract specified his compensation as follows:
1) "THE HOSPITAL" shall pay "THE RADIOLOGIST" a minimum guarantee of ten thousand dollars ($10,000.00) a month which shall be payable on the first of the following month.
2) Every three months the total amount collected for the production and interpretation of the radiological studies charged by "THE HOSPITAL" shall be computed and of the amount in excess of the minimum guarantee, "THE RADIOLOGIST" shall be paid 35% of the net profit of the Department.
When Dr. Franceschi received his first paycheck, it was much smaller than he expected. He spoke to the hospital's director of finances and its administrator, each of whom explained that after calculating the department's net income, the hospital then subtracted 55% as a so-called "contractual adjustment." Each claimed that such an adjustment was customary in Puerto Rico. The net effect of the adjustment was to reduce the pie from which Dr. Franceschi received a 35% slice.
Dr. Franceschi left the hospital when his contract expired in December 1994. After some preliminary skirmishing in the Puerto Rico commonwealth court, the parties attempted to pursue arbitration as provided by the employment contract's arbitration clause. Efforts at arbitration began in the fall of 1996, but seemed to founder on the attempt to select a panel. In January 1998, Dr. Franceschi's lawyer sent a letter to the hospital saying that "before proceeding to formalize the panel, I believe we should meet" to discuss settlement. Apparently nothing happened, and Dr. Franceschi eventually obtained new counsel. In the spring of 2000, Dr. Franceschi's counsel wrote to the hospital to revive arbitration talks. The hospital responded that it considered the matter closed.
In September 2000, Dr. Franceschi and his wife filed this lawsuit in federal court. Shortly thereafter, the hospital filed a motion for summary judgment on the grounds that the contract required arbitration and that the statute of limitations had run. In March 2001, the district court denied the motion. First, it found that the arbitration clause, by its terms, did not apply to this dispute. Second, it found that, although the three-year statute of limitations ran from the date that Dr. Franceschi rendered services, the January 1998 letter from his attorney restarted the three-year period because it demonstrated the creditor's intent to collect the debt.
In April 2004, the case was tried to a jury. At the close of plaintiff's evidence, the hospital moved for judgment as a matter of law, which the court denied. The hospital did not renew its motion at the close of all the evidence. The next day, the jury returned a verdict for the Franceschis, awarding $152,792 for breach of the contract, plus $100,000 each to the doctor and his wife for mental and emotional anguish. The hospital then filed a motion for judgment as a matter of law, which the court denied as procedurally barred, and a motion for a new trial or remittitur. The court denied the motion for a new trial, but granted the motion for remittitur in part. After finding that there was no evidence of the plaintiffs' extreme mental anguish, the court reduced those awards to $5,000 each.
Plaintiffs appeal the contract damages award, seeking $225,784 instead of the $152,792 awarded. Plaintiffs also seek to restore the award for mental anguish to the full $200,000. The hospital cross-appeals the damages awards, maintaining that it owes Dr. Franceschi only $16,857 and nothing for mental anguish. The hospital also appeals the court's denial of its motion for a new trial, and argues that the district court erred in denying its motion for summary judgment on the grounds of the statute of limitations and the arbitration clause.
The issues presented are not legally complex, and we dispose of them briefly. We address them in approximately the order in which they arose.
At the summary judgment stage, the hospital argued that the contract required mandatory arbitration of the complaint. The district court rejected the hospital's argument on the basis of an interpretation of the contract. More than three years elapsed between the district court's denial of the hospital's motion for summary judgment and the start of trial. In the intervening period, the hospital did nothing to press its arbitration claim. In particular, it did not file an interlocutory appeal, which the Federal Arbitration Act permits. See 9 U.S.C. § 16(a)(1)(B).
In Colon v. R.K. Grace & Co., 358 F.3d 1, 4 (1st Cir.2003), we signaled that we would likely adopt the rule that failure to take such an appeal could forfeit the right to arbitration:
Nothing in the statute requires an immediate appeal but three circuits have held that the failure to promptly appeal such a denial may by estoppel foreclose the demanding party's right to arbitration, although this is not automatic and depends on a showing of prejudice to the other side. The reason is that it is wasteful to have a full trial and then determine by a post-trial appeal that the whole matter should have been arbitrated and so start again. . . . We are sympathetic to the approach of the [three] Circuits, and it is wise for us to make this clear by dictum so as to give warning to the bar.
(Footnote omitted). We did not formally adopt this rule in Colon because "the district judge did not definitively deny the arbitration request until after . . . the trial had already occurred." Id. Here,...
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