Hayes v. Northern Hills General Hosp., 20497

• Citation: 1999 SD 28,590 N.W.2d 243
• Decision Date: 10 March 1999
• Docket Number: No. 20497,20497
• Parties: 14 IER Cases 1742, 1999 SD 28 Craig R. HAYES, M.D., and Craig R. Hayes, M.D., P.C., Plaintiffs and Appellants, v. NORTHERN HILLS GENERAL HOSPITAL; Charles Schulz, Hospital CEO, Black Hills Medical Center, P.C., Canis Lupus Partnership; Northern Hills Medical Associates, Inc.; Ruth M. McLaughlin, M.D.; Ruth M. McLaughlin, M.D., P.C.; Randall P. Graff; M.D.; Individually and in his Capacity as Director of Northern Hills General Hospital; Randall P. Graff, M.D., P.C.; Thomas J. Groeger, M.D.; Individually and in his Capacity as Director of Northern Hills General Hospital; Thomas J. Groeger, M.D., P.C.; Reuben B. Trinidad, M.D., Individually and in his Capacity as Director of Northern Hills General Hospital; Reuben B. Trinidad, M.D., P.C.; and Scott K.Ross, M.D., Defendants and Appellees.
• Court: Supreme Court of South Dakota

Page 243

590 N.W.2d 243

14 IER Cases 1742, 1999 SD 28

Craig R. HAYES, M.D., and Craig R. Hayes, M.D., P.C., Plaintiffs and Appellants, v. NORTHERN HILLS GENERAL HOSPITAL; Charles Schulz, Hospital

CEO, Black Hills Medical Center, P.C., Canis Lupus

Partnership; Northern Hills Medical Associates, Inc.; Ruth

M. McLaughlin, M.D.; Ruth M. McLaughlin, M.D., P.C.;

Randall P. Graff; M.D.; Individually and in his Capacity

as Director of Northern Hills General Hospital; Randall P.

Graff, M.D., P.C.; Thomas J. Groeger, M.D.; Individually

and in his Capacity as Director of Northern Hills General

Hospital; Thomas J. Groeger, M.D., P.C.; Reuben B.

Trinidad, M.D., Individually and in his Capacity as Director

of Northern Hills General Hospital; Reuben B. Trinidad,

M.D., P.C.; and Scott K.Ross, M.D., Defendants and Appellees.

No. 20497.

Supreme Court of South Dakota.

Argued Jan. 14, 1999.

Decided March 10, 1999.

Gregory A. Eiesland and Michael P. Reynolds of Quinn, Eiesland, Day & Barker Rapid City, and Michael Abourezk, Rapid City, for plaintiffs and appellants.

Jeffrey G. Hurd of Bangs, McCullen, Butler, Foye & Simmons Rapid City, for appellee Northern Hills General Hospital, Schulz, Graff, Groeger, Trinidad.

Edward C. Carpenter of Costello, Porter, Hill, Heisterkamp and Bushnell, Rapid City, for appellee, Black Hills Medical Center, Canis Lupis, Norther Hills Med. Associates, McLaughlin, Graff, Groeger, M.D., Ind. Trinidad, Ind. Ross.

GILBERTSON, Justice.

¶1 Doctor Hayes (Hayes) brought suit against medical center, hospital, his former fellow shareholders and partners and partnerships (collectively defendants) after his services for these entities were involuntarily terminated. Hayes alleged sixteen (16) different causes of action. The trial court bifurcated the legal and equitable claims. Hayes prevailed in the trial on the equitable claims. The defendants' then moved for summary judgment on the legal claims. The trial court granted the defendants' motion. Hayes appeals. We affirm in part and reverse in part.

FACTS AND PROCEDURE

¶2 Hayes is a physician currently practicing in Spearfish, South Dakota. He is the sole shareholder and director of Craig R. Hayes, M.D., P.C. (Hayes, P.C.). Black Hills Medical Center (BHMC) is a closely held South Dakota corporation. BHMC operates a medical clinic in Deadwood, South Dakota. Hayes was a shareholder and director of BHMC from inception in 1981 until his termination in July 1992. Canis Lupus (Lupus) and Northern Hills Medical Associates (NHMA) are partnerships affiliated with BHMC. Northern Hills Medical Associates, Inc. (NHMAI) is a closely held corporation affiliated with BHMC. Lupus, NHMA and NHMAI are engaged in the business of purchasing and leasing medical equipment and holding the real and personal property associated with BHMC. Hayes was one of the originating members of these entities. Drs. Ruth M. McLaughlin, Randall P. Graff, Thomas J. Groeger and Reuben B. Trinidad are shareholders, directors and partners of BHMC, Lupus, NHMA and NHMAI.

¶3 BHMC was formed in the early 1980's when Homestake Mining Company (Homestake) offered a group of doctors the opportunity to provide health care services to its employees, dependents of employees and retirees. BHMC was to provide these services at a capped cost.

¶4 Hayes, P.C. had a contract with BHMC to provide medical services. Under the contract, his services could be terminated without cause. Termination required an unanimous vote of the shareholders. Hayes had also entered into a Buy-Sell Agreement which provided that upon termination of his employment with BHMC, his ownership of stock and his control in BHMC, Lupus, NHMA and NHMAI would also terminate.

¶5 In June 1992, the shareholders along with BHMC's legal counsel held a clandestine meeting purposely excluding Hayes. The reason for the meeting was to find a means to remove Hayes from BHMC and its affiliates. Subsequently, the shareholders and BHMC called a meeting for July 2, 1992, including Hayes. The shareholders then confronted Hayes, voted to terminate the contract between BHMC and Hayes, P.C. and removed him from the ownership and management of BHMC and affiliated entities.

¶6 After his termination, Hayes attempted to continue his medical practice in Deadwood. He made arrangements with Northern Hills General Hospital (NHGH) to lease a portion of its facilities. Sixteen days after agreeing to the lease, NHGH decided not to lease the space to Hayes.

¶7 Hayes alleges that his termination from BHMC was accomplished without the contractually required sixty-day notice, without cause, without approval of the entire board of directors and in violation of the contract. He also alleges that all the named defendants acted to ensure that he would not be able to reestablish a medical practice in Deadwood. ¹ Hayes eventually abandoned the practice of medicine in Deadwood and now practices in Spearfish.

¶8 On April 26, 1993, Hayes filed suit against Homestake alleging claims of intentional interference with the business relationships and contracts that existed between Hayes and BHMC. Hayes claimed damages to be a loss of earnings or profits, deprivation of the value of his ownership interest in BHMC and deprivation of the value of his equity. Homestake was involved in and apparently supported Hayes' termination from BHMC. Hayes was awarded $200,000.00 plus costs. Homestake paid the full amount of the judgment.

¶9 Hayes filed suit on August 4, 1993, against the defendants. ² Over Hayes' objection, the trial court bifurcated the legal and equitable claims and held a trial on the equitable issues on September 9, 1996. The court found Hayes and Hayes, P.C. were entitled to judgment in the amount of $102,765.95 for their interest in BHMC and its affiliated entities, but dismissed all other equitable claims.

¶10 The defendants then moved for summary judgment on Hayes' legal claims. The trial court entered summary judgment for the defendants. Hayes and Hayes, P.C. appeal raising the following issue:

¶11. Whether the trial court erred in granting the defendants'

motion for summary judgment.

STANDARD OF REVIEW

¶12 Our standard of review of a trial court's grant of a motion for summary judgment is well-settled. As we recently stated in Estate of Shuck v. Perkins County:

Summary judgment is authorized "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law." SDCL 15-6-56(c). We will affirm only when there are no genuine issues of material fact and the legal questions have been correctly decided. Bego v. Gordon, 407 N.W.2d 801, 804 (S.D.1987). All reasonable inferences drawn from the facts must be viewed in favor of the non-moving party. Morgan v. Baldwin, 450 N.W.2d 783, 785 (S.D.1990). The burden is on the moving party to clearly show an absence of any genuine issue of material fact and an entitlement to judgment as a matter of law. Wilson v. Great N. Ry. Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968).

1998 SD 32, p 6, 577 N.W.2d 584, 586 (1998) (citations omitted).

ANALYSIS AND DECISION

¶13. Whether the trial court erred in granting the defendants'

motion for summary judgment.

¶14 Hayes claims the following counts were inappropriately dismissed by the trial court through summary judgment: 1) tortious interference with a business relationship or expectancy; 2) intentional infliction of emotional distress; 3) breach of fiduciary duty; and 4) breach of contract. ³ We will discuss each claim below.

¶15. a. Tortious interference with business relationships

¶16. i. Recognizing the tort

¶17 This Court recognized tortious interference with business relationships or expectancies in Tibke v. McDougall, 479 N.W.2d 898 (S.D.1992). ⁴ Landstrom v. Shaver, 1997 SD 25, p 73, 561 N.W.2d 1, 16. See also Communication Tech. Sys., Inc. v. Densmore, 1998 SD 87, 583 N.W.2d 125. "This cause of action is the recognition that valid business relationships and expectancies are entitled to protection from unjustified interference." Landstrom, 1997 SD 25 at p 81, 561 N.W.2d at 18. The tort also protects a party's interest in stable economic relationships. Maltz v. Union Carbide Chemicals & Plastics Co., Inc., 992 F.Supp. 286, 312 (S.D.N.Y.1998). "For this tort to occur, the business relationship, if in existence, need not be cemented by written or verbal contract and, whether or not it is in existence, it need not be intended that there be a contract." 45 AmJur2d Interference § 50 (1969).

¶18 Our case law establishes the elements for the cause of action to be:

1) the existence of a valid business relationship or expectancy;

2) knowledge by the interferer of the relationship or expectancy;

3) an intentional and unjustified act of interference on the part of the interferer;

4) proof that the interference cause the harm sustained; and

5) damage to the party whose relationship or expectancy was disrupted.

Case v. Murdock, 1999 SD 22, p 12, 589 N.W.2d 917, 919. Densmore, 1998 SD 87 at p 24, 583 N.W.2d at 131. See also Tom Olesker's Exciting World of Fashion, Inc., v. Dun & Bradstreet, Inc., 16 Ill.App.3d 709, 713, 306 N.E.2d 549, 553 (1973) rev'd on other grounds, Tom Olesker's Exciting World of Fashion, Inc., v. Dun & Bradstreet, Inc., 61 Ill.2d 129, 334 N.E.2d 160 (1975). The trial court dismissed Hayes' interference with business expectancy count by summary judgment. The court found Hayes could not meet the first element for the cause of action as he presented no material fact showing the existence of a business relationship with a third party. The trial court found that the prospective loss of patients was entirely too speculative as Hayes was depending on unknown and unidentified patients.

¶19 Hayes claims that summary judgment on this count was improper because the court confused the torts of...