Hospital Corp. of America v. Florida Medical Center, Inc.

• Decision Date: 04 February 1998
• Docket Number: 96-4151 and 97-0851,Nos. 96-3096,s. 96-3096
• Citation: 710 So.2d 573
• Parties: 23 Fla. L. Weekly D387 HOSPITAL CORPORATION OF AMERICA, and Tamarac Acquisition Corporation, Appellants/ Cross-Appellees, v. FLORIDA MEDICAL CENTER, INC., Appellee/ Cross-Appellant.
• Court: Florida District Court of Appeals

Page 573

710 So.2d 573

23 Fla. L. Weekly D387

HOSPITAL CORPORATION OF AMERICA, and Tamarac Acquisition Corporation, Appellants/ Cross-Appellees, v. FLORIDA MEDICAL CENTER, INC., Appellee/ Cross-Appellant.

Nos. 96-3096, 96-4151 and 97-0851.

District Court of Appeal of Florida,

Fourth District.

Feb. 4, 1998.

Rehearing, Rehearing En Banc

and Certification Denied

March 30, 1998.

Alexander D. del Russo of Levy, Kneen, Mariani, Curtin, Wiener, Kornfeld & del Russo, P.A., West Palm Beach, for Appellants/Cross-Appellees.

Parker D. Thomson and Brian A. Hart of Thomson, Muraro, Razook & Hart, P.A., Miami, and Jack Stein and Caryn Carvo of Stein, Rosenberg & Winikoff, P.A., Fort Lauderdale, for Appellee/Cross-Appellant.

PER CURIAM.

We reverse a judgment founded on a verdict in favor of Florida Medical Center (FMC) against Hospital Corporation of America (HCA) and its affiliate, Tamarac Acquisitions. The trial court erred in failing to direct a verdict for the defense on the sole claims of breach of an implied duty of good faith and Appellants' alleged failure to follow the law.

FMC operated a medical complex, which had initially included a short term inpatient psychiatric facility. The facility held a Certificate of Need (CON) issued by HRS. At that time, HRS classified inpatient psychiatric facilities as either long term or short term, and issued separate CONs for the different categories. A hospital could not be built and could not operate without a CON, and a facility licensed to provide long term care was not allowed to provide any services beyond those specified in its license. § 395.033(5), Fla. Stat. (1987). In 1984, FMC acquired a CON from HRS to construct a 60 bed long term facility separate from their short term facility. FMC decided not to operate the new facility itself. Because CONs could not be sold for a profit, FMC negotiated a deal with HCA in which it would build the hospital and sell it to HCA along with the CON. FMC and HCA entered into a series of agreements under which FMC leased property on the grounds of an existing HCA hospital within the service area of FMC's short term care CON. FMC borrowed funds from HCA to build the hospital; hired an HCA affiliate to develop the hospital; retained an HCA affiliate to manage the hospital; and gave Tamarac Acquisition, a subsidiary of HCA, an option to purchase the hospital.

The hospital was built, opened, and sold to Tamarac in 1989. FMC's license to operate it was transferred to HCA, and HRS issued a new license to Tamarac for its operation of a long term psychiatric facility. At the time of the closing, the parties executed a termination of contracts document, a mutual waiver, and a release of all claims. The only agreement which survived the closing was an option agreement, which called for Tamarac to exercise an option within 30 days after the hospital was opened and called for the termination of all other agreements when the sale was closed. It also contained two sections which were titled "Covenant Not To Compete."

After the sale, FMC filed a written complaint with HRS that the hospital was violating its long term license by not meeting the 90-day minimum stay requirement. HRS issued a report which concluded that HCA was in violation of its license. However, in 1990, HRS abolished the distinction between long and short term categories, and the actions against HCA were dropped.

FMC alleged that HCA breached the covenant not to compete by operating as a short term facility and by actively supporting the amendment to the HRS rule abolishing the difference between short and long term facilities. FMC asserted a claim for fraud in the inducement, which was dismissed by the trial court. FMC also claimed a breach of an implied duty of good faith and fair dealing under the option agreement due to HCA's operating the hospital in violation of its license and circumventing the non-compete clause in the option contract.

Before trial, however, the trial court ruled that the contract provision in which HCA agreed not to pursue licensing as a short term in-patient facility was void as an unlawful restraint of trade. That left FMC's agreement not to seek long term licensing as the only remaining...