Greater Hous. Radiation Oncology, P.A. v. Sadler Clinic Ass'n, P.A.

• Decision Date: 04 October 2012
• Docket Number: No. 09–11–00460–CV.,09–11–00460–CV.
• Citation: 384 S.W.3d 875
• Parties: GREATER HOUSTON RADIATION ONCOLOGY, P.A., Oncology Management Services, L.P., and Oncology Reimbursement Services, L.P., Appellants, v. SADLER CLINIC ASSOCIATION, P.A., Appellee.
• Court: Texas Court of Appeals

384 S.W.3d 875

GREATER HOUSTON RADIATION ONCOLOGY, P.A., Oncology Management Services, L.P., and Oncology Reimbursement Services, L.P., Appellants,

v.SADLER CLINIC ASSOCIATION, P.A., Appellee.

No. 09–11–00460–CV.

Court of Appeals of Texas, Beaumont.

Submitted March 29, 2012.

Decided Oct. 4, 2012.

S. Shawn Stephens, Michael W. Mengis, Baker & Hostetler LLP, Houston, for appellants/cross appellee.

Robert M. O'Boyle, Tiffany Hildreth, Strasburger & Price, LLP, Austin, for appellee/cross appellant.

Before McKEITHEN, C.J., GAULTNEY and KREGER, JJ.

OPINION

CHARLES KREGER, Justice.

This is an appeal from a judgment rendered after a jury verdict that awarded Sadler Clinic Association, P.A. tort damages in the amount of $307,935 and Oncology Reimbursement Services, L.P. contract damages in the amount of $57,583. Sadler Clinic Association, P.A., Greater Houston Radiation Oncology, P.A., and Oncology Management Services, L.P. were awarded no damages on their breach of contract claims. In multiple issues, appellants contend the trial court erred in construing the Professional Services Agreement, in its charge of the issues to the jury, and in awarding attorneys' fees. We reverse and remand in part and affirm in part.

I. BACKGROUND

In 2007, Sadler Clinic Association, P.A., began talking with Dr. Kirk Kanady about developing a radiation oncology center. Kanady had been involved in the establishment of several radiation oncology centers in the Houston area. In 2008, Sadler began the process of developing its radiation oncology center. On July 14, 2008, Sadler entered into three agreements to provide for the operation, maintenance, and professional service of its radiation oncology center. Sadler signed (1) a professional services agreement with Greater Houston Radiation Oncology, P.A., (“GHRO”), a physician group of radiation oncologists, (2) a billing and collection services agreement with Oncology Reimbursement Services, L.P. (“ORS”), and (3) a management services agreement with Oncology Management Services, L.P. (“OMS”). On July 18, 2008, Kanady signed all three agreements as president of all three companies (hereinafter referred to collectively as the “Kanady entities”).

The facility for Sadler's radiation oncology clinic was not complete when Sadler initially entered into the agreements with Kanady. So that GHRO physicians could begin treating Sadler patients, Sadler signed a lease agreement with another clinic, Northwoods Urology (“Vision Park”),¹ which was already set up for providing radiation oncology services. The first patient was seen at Vision Park on August 28, 2008. The Kanady entities provided services at Vision Park under the parameters of their agreements with Sadler. Cuong (“Chris”) Phan was the primary GHRO physician who provided radiation oncology services pursuant to the professional services agreement (“PSA”) at Vision Park. Because the GHRO physicians were not yet credentialed under Sadler's tax identification number,² the parties agreed that ORS would begin billing under GHRO's tax identification number, collect the payments, and then turn the collected funds over to Sadler. Sadler would then, in turn, pay GHRO, OMS, and ORS pursuant to the terms of the agreements.

Sadler's radiation oncology center, located at Sadler's clinic (“Pinecroft”) ³ was completed and the first patient was seen at Pinecroft on February 5, 2009. At that time, the center had only one Linear Accelerator.⁴ Chris Phan's brother, Thinh Phan (“T. Phan”), was the primary GHRO physician who provided radiation oncology services at Pinecroft pursuant to the PSA. Shortly after the Pinecroft clinic opened, T. Phan was introduced to Dr. Jason Berilgen,another radiation oncologist, who was touring Sadler's Pinecroft radiation oncology center with Sadler's chief operating officer. At trial, the evidence was disputed regarding the purpose of Berilgen's initial visit to the facility. T. Phan testified that when he was introduced to Berilgen at Pinecroft, Berilgen stated to him that he was interviewing for the radiation oncologist position. Berilgen testified that he requested a tour of the facility because he was considering opening his own radiation oncology center. Robert Branstetter, Sadler's chief financial officer, testified that Berilgen visited at the request of another Sadler physician who thought Berilgen would enjoy touring the facility. Though Berilgen admitted at trial that he was interested in employment with Sadler, he testified that he knew nothing was available at that time.

T. Phan discussed Berilgen's visit with Branstetter to inquire as to whether there was a problem with his performance at Pinecroft, and Branstetter assured him that he was doing well and the physicians were pleased with his performance. Kanady also discussed the incident with Branstetter who assured Kanady that Berilgen was only at Sadler on a “courtesy visit,” that Sadler was happy with T. Phan, that Sadler was committed to its relationship with the Kanady entities, and that Sadler was not attempting to hire a new radiation oncologist.

Shortly after Berilgen's visit to the facility, Kanady proposed an amendment to the PSA that extended the contract term for ten years and increased the monetary penalty for early termination. Kanady sent an email to Branstetter in early March 2009 and attached the proposed amendment to the PSA. Kanady's email stated, “I am not doubting you when you told me that you have no intention of changing billing, management or professional services with us, but I am not so certain about others in your organization.” Sadler's Management Board ⁵ declined to accept Kanady's proposed amendment because the term was too long. In April 2009, Kanady proposed a five year extension to the PSA. The Board declined to accept Kanady's proposed five year extension. Branstetter testified that during this time, he received frequent phone calls from Berilgen expressing his interest in practicing radiation oncology at Pinecroft.

In June 2009, the Board began discussing hiring its own radiation oncologist. One of the Board members suggested asking Berilgen if he was still interested in a position with Sadler. Branstetter testified at trial that Sadler and Kanady had experienced some “rocky patches,” particularly regarding matters related to the billing and collections agreement (“Billing Agreement”) with ORS. Branstetter testified he was concerned that Kanady would decide to leave and leave Sadler's clinic without a radiation oncologist. In July 2009, the Board hired Berilgen to provide radiation oncology services at Sadler's Pinecroft radiation oncology center. His official title was medical director of the center. T. Phan testified that prior to Sadler hiring Berilgen, he believed he was the director of the radiation oncology center at Sadler. T. Phan testified that at the time Berilgen was hired, Phan was seeing roughly thirty patients a day in the center. Phan and Kanady both testified that this patient load did not necessitate another radiation oncologist. On July 20, 2009, GHRO's attorney sent Sadler a demand letter that stated Sadler was in breach of the PSA and gave Sadler 15 days to terminate or reassign Berilgen or face potential legal action.

The evidence established that after Berilgen was hired, the referrals from Sadler physicians to T. Phan dropped quickly. Phan testified that by the third or fourth week, his referrals had dropped by more than seventy-five percent. Though Berilgen was paid a yearly salary by Sadler, the PSA was structured such that GHRO was compensated for its physicians' services based on collections attributable to the services they provided. If T. Phan did not see patients, GHRO was not compensated. T. Phan testified that in addition to his referrals drying up, one of his patients was “redirected” to see Berilgen by one of the Sadler physicians. When T. Phan confronted the Sadler physician, he was told, “ ‘It has nothing to do with you, it's business.’ ” T. Phan testified that eventually Sadler physicians quit sending him patients. T. Phan continued to treat all of his Sadler patients through the end of their treatment. T. Phan saw his last patient at Sadler in October 2009.

On August 13, 2009, Sadler sent OMS written notice that it was terminating the Management Agreement, together with a check for the amount of liquidated damages set forth in the agreement. The following day, Sadler gave ORS written notice that it was in breach of the Billing Agreement and gave ORS thirty days to cure the alleged breaches. Sadler ceased processing reimbursement claims through ORS on August 17, 2009. Sadler declined to terminate Berilgen. On September 1, 2009, Sadler filed a declaratory judgment action seeking a declaration that the PSA was not an exclusive contract and Sadler was entitled to hire non-GHRO radiation oncologists. GHRO, OMS, and ORS filed a counterclaim against Sadler. Each entity alleged that Sadler breached its respective agreement. Additionally, OMS sought a declaratory judgment that the Management Agreement could only be terminated for cause and was still in effect. Sadler terminated the PSA and Billing Agreement on October 9, 2009. Thereafter, Sadler amended its petition and alleged that GHRO, ORS, and OMS breached their agreements with Sadler.

The jury awarded Sadler $307,935 for GHRO's failure “to turn over funds collected on Sadler's behalf[.]” The jury found that both Sadler and ORS failed to comply with the Billing Agreement but found that ORS's breach of the agreement was excused. The jury awarded ORS $57,583 for Sadler's breach. The jury concluded that GHRO failed to comply with the PSA but found that Sadler was not entitled to any damages. The jury awarded both Sadler and appellants $500,000 each in attorneys' fees, however, the trial court's judgment only awarded attorneys' fees to Sadler. The court's judgment ordered that Sadler recover $500,000 in attorneys' fees from GHRO, ORS, and...