Mayer v. Pierce County Medical Bureau, Inc.

• Decision Date: 19 December 1995
• Docket Number: No. 17941-5-II,17941-5-II
• Citation: 80 Wn.App. 416,909 P.2d 1323
• Parties: Harold MAYER and Maralyn Mayer, husband and wife, and Harold Mayer, Inc., P.S., a Washington professional service corporation, Appellants, v. PIERCE COUNTY MEDICAL BUREAU, INC., a Washington non-profit corporation, dba Pierce County Medical, Respondent.
• Court: Washington Court of Appeals

Page 416

80 Wn.App. 416

909 P.2d 1323

Harold MAYER and Maralyn Mayer, husband and wife, and Harold

Mayer, Inc., P.S., a Washington professional

service corporation, Appellants, v. PIERCE COUNTY MEDICAL BUREAU, INC., a Washington non-profit

corporation, dba Pierce County Medical, Respondent.

No. 17941-5-II.

Court of Appeals of Washington,

Division 2.

Dec. 19, 1995.

Publication Ordered Feb. 9, 1996.

Daniel R. Kyler, Rush, Hannula & Harkins, Tacoma, for Appellants

Jack G. Rosenow, Cheryl A. Asche, Rosenow, Johnson, Graffe, Keay, Pomeroy & Moniz, Tacoma, for Respondent.

SEINFELD, Chief Judge.

Dr. Harold Mayer appeals a summary judgment in favor of the Pierce County Medical Bureau in this breach of contract action. Finding that the trial court properly construed the contract, and that Mayer was not entitled to due process before cancellation of his Preferred Provider status, we affirm.

FACTS

Dr. Mayer practiced internal medicine. In 1966 he became a member of the Pierce County Medical Bureau (the Bureau), a non-profit health care provider, that contracts with physicians and hospitals to provide benefits to its health plan subscribers.

In 1984, Mayer entered into a "Participation Agreement" with the Bureau. Later that year, he entered into a separate "Preferred Participant Agreement" with the Bureau. In the latter, the Bureau agreed to compensate Mayer for his treatment of Preferred Provider subscribers. In turn, Mayer agreed to abide by a series of conditions set forth in six numbered paragraphs in the Preferred Participant Agreement, including:

2. The Preferred Participant agrees to utilization review. ¹ To remain eligible for preferred participation, the Participant agrees to practice within the parameters of care established by the Corporation, understanding that such care meets the criteria of medical necessity, and to resolve any differences through binding arbitration as set forth by the Board of Trustees.

The final two paragraphs of the Preferred Participant Agreement provide:

This Preferred Participant Agreement is in addition to, and does not replace the Participant Agreement between Corporation and Physician filed with the Bureau. All conditions and provisions of the Participant Agreement shall remain binding.

THIS AGREEMENT shall be continuous unless and until cancelled by either party at any time, by giving thirty (30) days written notice to the other party hereto.

In November 1991, the Bureau's medical director, Lester A. Reid, M.D., advised Mayer that he "ranked very high" in his specialty "in average services and charges per patient, or in specific types of services such as cardiovascular or laboratory services per patient." Recognizing that the statistics may reflect "valid differences" among providers, Reid asked to review the records of particular patients. Mayer complied with Reid's request.

On or before January 27, 1992, Mayer received a copy of his Medical Provider Activity Summary showing the Utilization Review Committee's statistical findings concerning his medical practice. The graphs in this document confirm that Dr. Mayer's "dollar activity" and "services activity" were both high when compared to the specialty average.

On January 27, 1992, the Bureau notified Mayer that his "level of practice [was] too costly" and, therefore, it was cancelling his status as a Preferred Participant as of March 1, 1992. The letter said that the Bureau based its decision to terminate on the information it had gathered and evaluated during the utilization review process, and that the cancellation did not affect Mayer's participating provider status with the Bureau.

According to Mayer, without the benefit of Preferred Participant status, he could not afford to operate his private practice. Consequently, he closed his office and sought employment elsewhere.

In December 1992, Mayer filed a complaint, alleging, inter alia, that the Bureau's cancellation of his Preferred Participant status breached the parties' contract. The parties filed cross motions for summary judgment. The trial court granted the Bureau's motion with regard to the breach of contract claim on September 20, 1993 and it denied Mayer's motion for reconsideration on October 1, 1993. Mayer appeals these rulings.

ANALYSIS

A trial court may grant summary judgment only if, after viewing the pleadings and record, and drawing all reasonable inferences in favor of the non-moving party, it finds there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Higgins v. Stafford, 123 Wash.2d 160, 168-69, 866 P.2d 31 (1994). In construing a written contract, the basic principles require that (1) the intent of the parties controls; (2) the court ascertains the intent from reading the contract as a whole; and (3) a court will not read an ambiguity into a contract that is otherwise clear and unambiguous. Felton v. Menan Starch Co., 66 Wash.2d 792, 797, 405 P.2d 585 (1965).

Interpretation of an unambiguous contract is a question of law. Absher Constr. Co. v. Kent School District No. 415, 77 Wash.App. 137, 141, 890 P.2d 1071 (1995). "If a contract is unambiguous, summary judgment is proper even if the parties dispute the legal effect of a certain provision." Voorde Poorte v. Evans, 66 Wash.App. 358, 362, 832 P.2d 105 (1992).

I AMBIGUITY IN THE CONTRACT

Mayer contends that paragraph 2 and the final paragraph are ambiguous and conflict with one another. As the non-drafting party, he argues that any ambiguity in the contractual language should be resolved in his favor. See Wise v. Farden, 53 Wash.2d 162, 168, 332 P.2d 454 (1958). Accordingly, he argues that the Preferred Participant Agreement required the Bureau to resolve any dispute arising from the utilization review through arbitration.

A contract provision is ambiguous when its terms are uncertain or when its terms are capable of being understood as having more than one meaning. Shafer v. Board of Trustees of Sandy Hook Yacht Club Estates, Inc., 76 Wash.App. 267, 275, 883 P.2d 1387 (1994), review denied, 127 Wash.2d 1003, 898 P.2d 308 (1995). A provision, however, is not ambiguous merely because the parties suggest opposing meanings. Shafer, 76 Wash.App. at 275, 883 P.2d 1387. "[A]mbiguity will not be read into a contract where it can be reasonably avoided." McGary v. Westlake Investors, 99 Wash.2d 280, 285, 661 P.2d 971 (1983).

The terms of the Preferred Participant Agreement are not inconsistent or ambiguous. Paragraph 2 requires the physician, as a condition to remaining eligible as a preferred provider, to (1) submit to utilization review; (2) practice within the parameters of care established by the Bureau; and (3) resolve any "differences" presumably arising from the utilization review through binding arbitration. The final paragraph, on the other hand, provides that the agreement will "be continuous unless and until cancelled by either party at any time, by giving thirty (30) days notice to the other party hereto."

St. Yves v. Mid State Bank, 111 Wash.2d 374, 377, 757 P.2d 1384 (1988), presents a similar issue. The contract there contained a clause allowing for termination of employment at will and another clause setting forth the employee's term of employment. The St. Yves court found that the two clauses dealt with two separate contractual rights and that the term clause created only a "presumptive term of employment," which the Bank could terminate by the procedures set forth in the termination clause. St. Yves, 111 Wash.2d at 374-75, 757 P.2d 1384.

Reading the Preferred Participant Agreement as a whole, it is apparent that the contested provisions here, as in St. Ives, govern two separate issues. Paragraph 2 is one of six paragraphs that impose certain conditions the Preferred Participant must satisfy to retain his status. The final paragraph governs cancellation of the agreement, granting both parties the right to cancel the agreement upon thirty days notice. The wording and placement of the contested provisions within the agreement show the parties' intent to trigger the arbitration requirement if and when the Preferred Participant complained about utilization review and the intent that the final paragraph modify the entire agreement, including paragraph 2.

Although the Bureau used its utilization review process to determine that Mayer's "level of practice [was] too costly," Mayer did not pursue his contractual right to arbitration. He did not request arbitration during the utilization review process or after he received notice of cancellation of his Preferred Provider status.

Finally, although an implied duty of good faith and fair dealing is part of every contract, this duty only arises in connection with terms agreed to by the parties. Badgett v. Security State Bank, 116 Wash.2d 563, 569, 807 P.2d 356 (1991). As the Bureau did not agree to initiate arbitration, the duty of good faith did not require it to do so. Provisions providing for the at will cancellation of an agreement, although sometimes harsh, are enforceable in this State. See Thompson v. St. Regis Paper Co., 102 Wash.2d 219, 233, 685 P.2d 1081 (1984). Thus, the trial court did not err in granting the Bureau summary judgment as a matter of law.

II

DUE PROCESS: THE BUREAU'S BYLAWS

Mayer also contends that the Bureau's...