Natchez Reg'l Med. Ctr. v. Quorum Health Res., LLC, Civil Action No. 5:09–cv–207–DCB–JMR.

• Decision Date: 18 July 2012
• Docket Number: Civil Action No. 5:09–cv–207–DCB–JMR.
• Citation: 879 F.Supp.2d 556
• Parties: NATCHEZ REGIONAL MEDICAL CENTER, Plaintiff, v. QUORUM HEALTH RESOURCES, LLC, Jeffrey S. Wesselman, and Michael Anderson, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

879 F.Supp.2d 556

NATCHEZ REGIONAL MEDICAL CENTER, Plaintiff,

v.QUORUM HEALTH RESOURCES, LLC, Jeffrey S. Wesselman, and Michael Anderson, Defendants.

Civil Action No. 5:09–cv–207–DCB–JMR.

United States District Court,

S.D. Mississippi,

Western Division.

July 18, 2012.

John L. Maxey, II, Kelly E. Hollingsworth, Maxey Wann, PLLC, Jackson, MS, Aaron L. Casagrande, Kevin G. Hroblak, William F. Ryan, Whiteford, Taylor & Preston, LLP, Baltimore, MD, for Plaintiff.

Eric J. Breithaupt, Jeremy L. Carlson, Jonathan W. MacKlem, Richard E. Smith, Richard M. Thayer, Birmingham, AL, Robert L. Johnson, III, Robert L. Johnson, III, Attorney At Law, Natchez, MS, for Defendants.

MEMORANDUM OPINION AND ORDER

DAVID BRAMLETTE, District Judge.

This cause is before the Court on Defendants' Motion for Summary Judgment [docket entry no. 90], Defendants' Motion to Exclude [docket entry no. 93], Plaintiff's Motion in Limine to Exclude Testimony of Expert Witness John Czarnetzky [docket entry no. 94], Plaintiff's Motion in Limine to Exclude Certain “Opinions” of Defense Expert J.W. Tillett, Jr., and to Strike Related Portions of Tillet's “Expert Report” [docket entry no. 97], Defendants' Motion in Limine [docket entry no. 114], and Plaintiff's Motion in Limine and to Exclude Witness Testimony [docket entry no. 115]. Having carefully considered these Motions, the substantial record in this case, applicable statutory and case law, and being otherwise fully advised in the premises, the Court finds and orders as follows:

I. Overview and Procedural History

The present controversy arises out of the Defendants' alleged mismanagement of Natchez Regional Medical Center (NRMC). NRMC is a not-for-profit hospital owned by Adams County, Mississippi, and is established for the purpose of delivering quality healthcare to the “Miss–Lou Region.” ¹ NRMC Bylaws at 3. As such, the Adams County Board of Supervisors appoints permanent residents of Adams County, Mississippi, to a seven-member Board of Trustees (Board) for a three-year term. Id. at 3–4. The Board's purpose is to oversee the hospital's maintenance, operation, and institutional planning. Id. Quorum Health Resources, LLC is a private company that specializes in providing management services to hospitals. Complaint ¶ 2. In order to provide these management services, Quorum installs “Key Personnel” into hospitals, including a CEO and CFO, to manage the hospital's daily affairs and assist the hospital in its short-term and long-term fiscal management. Defendant Jeffrey Wesselman acted as the CFO from September 2005 through April 2006, and then as the CEO from April 2006 to March 2008. Complaint ¶ 4. Defendant Michael Anderson was the CFO from April 2006 through February 2008. Complaint ¶ 3.

NRMC entered into its first management agreement with Quorum in 1992, and this agreement was renewed in 1999. The 1999 Management Agreement (hereinafter referred to as “the Agreement” or “Contract”) was still in effect at the time the present dispute arose between the Parties, although they amended the Agreement three times. Pursuant to the Contract, Quorum was obliged to perform certain duties for NRMC, which, among other things, included staffing the hospital with “Key Personnel,” submitting budgets to the Board, supervising accounting, charging for hospital services and receiving payments, and presenting management plans and financial reports. See, e.g., Management Agreement (1999) at 3–7, docket entry 90–3. The effect of the Agreement was that NRMC ceded to Quorum, or more specifically, its Key Personnel, control over the day-to-day operations of the hospital.

Sometime in 2008, the Board grew dissatisfied with Quorum and its Key Personnel's performance and terminated the Contract. The reasons for the Board's dissatisfaction are explained in greater detail below. Shortly thereafter, the Board replaced Quorum with another management company, Healthcare Management Partners, LLC (HMP), and with HMP's assistance allegedly discovered that Quorum and its representatives had been mismanaging the hospital as far back as 2001. On December 9, 2009, NRMC filed a fifty-three page Complaint in this Court, which has jurisdiction over the cause as the matter is between citizens of different states and well exceeds the Court's $75,000 jurisdictional threshold. NRMC brings nine separate causes of action, ranging from a run-of-the-mill breach of contract claim to a less-frequently alleged corporate waste claim. On August 20, 2010, 2010 WL 3324955, the Court denied the Defendants' Motion to Dismiss. They now move for summary judgment pursuant to Federal Rule of Civil Procedure 56. Because the case was originally scheduled for July, the Parties have also filed their motions to exclude and motions in limine. In response to the Defendants' Motion to Exclude, the Court held a Daubert hearing on June 20, 2012, at the United States Courthouse in Natchez, Mississippi. See May 24, 2012 Order. At that time, pursuant to the Court's instruction, the Parties also engaged in oral argument as to the enforceability of the exculpatory clause contained in the three Amendments to the Agreement. See id. Considering all relevant matters fully briefed and argued, the Court will address the pending Summary Judgment Motion [docket entry no. 90] and the multiple Motions to Exclude [docket entry nos. 93, 94, 97] but will delay ruling on the remaining unresolved issues raised in the Motions in Limine [docket entry nos. 114, 115], as identified in the Stipulation and Consent Order [docket entry no. 126].

II. Defendants' Motion for Summary Judgment

Summary judgment is apposite “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. Pro. 56(a). “A fact is ‘material’ if its resolution in favor of one party might affect the outcome of the lawsuit under governing law. An issue is ‘genuine’ if the evidence is sufficient for a reasonable jury to return a verdict for the non-moving party.” Ginsberg 1985 Real Estate P'ship v. Cadle Co., 39 F.3d 528, 531 (5th Cir.1994) (citations omitted). The party moving for summary judgment bears the initial responsibility of apprising the district court of the basis for its motion and the parts of the record which indicate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

“Once the moving party presents the district court with a properly supported summary judgment motion, the burden shifts to the non-moving party to show that summary judgment is inappropriate.” Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998). “The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). But the nonmovant must “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Moreover, “[t]he mere existence of a scintilla of evidence is insufficient to defeat a properly supported motion for summary judgment.” Anderson, 477 U.S. at 252, 106 S.Ct. 2505. Summary judgment must be rendered when the nonmovant “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp., 477 U.S. at 322, 106 S.Ct. 2548.

1. Whether the Limitation of Liability Clause in the Management Agreement Bars NRMC from Recovering Most of the Damages It Seeks

The Defendants first argue that the following limitation of liability clause, found in the First, Second, and Third Amendments to the Management Agreement, precludes the majority of damages sought by NRMC:

Limitation of Liability for Quorum. To the extent permitted by Mississippi law, Quorum, its employees (including, without limitation, the Key Personnel), agents, representatives and/or Affiliates shall have no liability to NRMC for any indirect, consequential, incidental, exemplary, special or punitive damages or costs including, without limitation, lost profits or loss of good will, even if such party has been advised, knew or should have known of the possibility thereof.

First Amendment to the Management Agreement ¶ 10.² Clauses which limit liability historically have been viewed with disfavor in Mississippi jurisprudence, but recently the Mississippi Supreme Court has expressed a willingness to validate such agreements based upon the now-dominant public policy that parties should be free to contract. Kroger Co. v. Chimneyville Props. Ltd., 784 F.Supp. 331, 349 (S.D.Miss.1991) (citing Cappaert v. Junker, 413 So.2d 378, 381 (Miss.1982)).

The Mississippi Supreme Court has explained its view of limitations of liability clauses this way:

The law does not look with favor on contracts intended to exculpate a party from the liability of his or her own negligence although, with some exceptions, they are enforceable. However, such agreements are subject to close judicial scrutiny and are not upheld unless the intention of the parties is expressed in clear and unmistakable language.

Turnbough v. Ladner, 754 So.2d 467, 469 (Miss.1999). “Clauses limiting liability are given rigid scrutiny by the courts, and will not be enforced unless the limitation is fairly and honestly negotiated and understandingly entered into.” Id. (quoting Farragut v. Massey, 612 So.2d 325, 330 (Miss.1992)). Furthermore, even if the bargaining process withstands this “rigid scrutiny,” the Mississippi Supreme Court has stated that a court must void an otherwise honestly negotiated exculpatory clause if it contravenes public policy. Cappaert, 413 So.2d at 382. The standard for what constitutes a violation of public policy is not always clear; thus...