Perry v. Baptist Health

• Decision Date: 24 June 2004
• Docket Number: No. 03-1130.,03-1130.
• Citation: 189 S.W.3d 54
• Parties: Bobby PERRY v. BAPTIST HEALTH.
• Court: Arkansas Supreme Court

189 S.W.3d 54

Bobby PERRY v. BAPTIST HEALTH.

No. 03-1130.

Supreme Court of Arkansas.

June 24, 2004.

Lax, Vaughn, Fortson & McKenzie, P.A., by: Grant E. Fortson, Little Rock, for Appellant.

The Health Law Firm, by: Harold H. Simpson, Little Rock, for Appellee.

ANNABELLE CLINTON IMBER, Justice.

This case comes to the court on petition for review from the Arkansas Court of Appeals. For his sole point on appeal, Appellant Dr. Bobby Perry contends that the circuit court erred in concluding that he failed to state sufficient facts in his first amended complaint, as required by Ark. R. Civ. P. 8(a)(1) (2004), and, therefore, erred in dismissing the complaint against Baptist Health pursuant to Ark. R. Civ. P. 12(b)(6) (2004). The Arkansas Court of Appeals affirmed the lower court's dismissal of Dr. Perry's complaint. We subsequently granted Dr. Perry's petition for review. When we grant review following a decision by the court of appeals, we review the case as though it was originally filed in this court. Edens v. Superior Marble & Glass, 346 Ark. 487, 58 S.W.3d 369 (2001). We hold that Dr. Perry's first amended complaint states sufficient facts to withstand a Rule 12(b)(6) motion to dismiss, and reverse the circuit court's order.

Our review is limited to the circuit court's grant of Baptist Health's Rule 12(b)(6) motion to dismiss. In reviewing the trial court's decision on a motion to dismiss under Ark. R. Civ. P. 12(b)(6), this court treats the facts alleged in the complaint as true and views them in a light most favorable to the party who filed the complaint. Clayborn v. Bankers Standard Ins. Co., 348 Ark. 557, 75 S.W.3d 174 (2002). In testing the sufficiency of the complaint on a motion to dismiss, all reasonable inferences must be resolved in favor of the complaint, and the pleadings are to be liberally construed. Id. This court's rules require fact pleading, and a complaint must state facts, not mere conclusions, in order to entitle the pleader to relief. Ark. R. Civ. P. 8(a) (2004); Clayborn v. Bankers Standard Ins. Co., supra. The court will look to the underlying facts supporting an alleged cause of action to determine whether the matter has been sufficiently pled. Clayborn v. Bankers Standard Ins. Co., supra.

The facts, as pled in the first amended complaint, are as follows. In late 1996, Appellant Dr. Bobby D. Perry along with several other surgeons, entered into negotiations with Baptist Health (Baptist) to provide on-call trauma surgery services for Baptist Medical Center. As a result of their negotiations, Dr. Perry and the other surgeons formed Arkansas Trauma Surgeons, P.L.L.C. (ATS), a limited liability company with a stated purpose of entering into a professional services agreement with Baptist. The terms of the ATS Operating Agreement were negotiated with and approved by Baptist. More particularly, Baptist is designated as a third-party beneficiary to the ATS Operating Agreement, and the selection of physicians for membership in ATS is subject to Baptist's prior approval. The operating agreement provides that each member of ATS will be compensated based upon the number of times he or she provides call coverage for Baptist.

On December 5, 1996, and as contemplated by the ATS Operating Agreement, Baptist and ATS entered into a professional services agreement (Services Agreement).¹ In that agreement, ATS agrees to provide a qualified surgeon on call at all times to perform trauma surgery at Baptist Medical Center. Baptist in turn agrees to pay ATS $1,000 per day of on-call coverage. Baptist requires that the on-call coverage be provided by properly trained surgeons licensed in Arkansas, and it retains the right to have Baptist's Chief Executive Officer and Board of Trustees review the on-call services provided by ATS. In addition, Baptist retains the right to have its Trauma Committee review all professional services rendered by the individual physicians. The Services Agreement also calls on ATS to provide a list of physicians who, subject to Baptist's approval, will perform on-call services at the inception of the agreement. Any additions to the on-call rotation list must be approved by Baptist in advance. According to the Services Agreement, both ATS and the individual physicians providing on-call services are independent contractors.

Furthermore, under the terms of the Services Agreement, ATS agrees to designate a liaison to coordinate the trauma call coverage between Baptist and the physicians. The rotation schedule is to be governed by the ATS Operating Agreement. The Services Agreement requires ATS to provide a designated physician who will be reasonably available to perform trauma care at Baptist Medical Center when on call. Nonetheless, the designated physician may schedule other surgeries if he or she first obtains backup by another ATS physician. Baptist agrees to provide all facilities, equipment, supplies, and non-physician personnel needed for trauma services. In addition, the Services Agreement provides that Baptist will have no control over the methods by which each ATS physician exercises his or her medical judgment. However, Baptist retains the right to have an ATS physician removed from the trauma on-call schedule if it determines "in its reasonable judgment," that the ATS physician "is unsatisfactory in the performance of his duties."

According to the first amended complaint, Dr. Perry was the designated ATS physician on call for Baptist on June 6, 2001. Although Dr. Perry was scheduled to perform elective surgery at St. Vincent's Infirmary that same day, he made arrangements to have another ATS physician, Dr. Gabriel Peal, serve as back-up for his on-call duty with Baptist. While performing the elective appendectomy, Dr. Perry received an emergency phone call from Baptist. The call had come from a Jacksonville hospital where a patient, who had been involved in a motor vehicle accident, was being treated in the emergency room. Dr. Perry concluded that the Jacksonville patient was not stable enough to be transferred to Baptist Medical Center and that the Jacksonville hospital was sufficiently equipped to stabilize the patient.

Soon thereafter, a Baptist administrator called Dr. Perry and unsuccessfully tried to persuade him to transfer the Jacksonville patient to Baptist Medical Center. Dr. Perry then called the ATS liaison, Dr. Daryl Stewart, who concurred with Dr. Perry's medical judgment. Unfortunately, the Jacksonville patient died while being treated at the Jacksonville hospital. Baptist subsequently directed ATS to remove Dr. Perry from the trauma on-call schedule effective July 13, 2001.

Dr. Perry filed suit in his individual capacity alleging breach of contract and breach of the implied covenant of good faith and fair dealing. In his first amended complaint, Dr. Perry alleges that he is an intended third-party beneficiary of the Services Agreement executed between ATS and Baptist. The complaint states that Baptist breached the contract and the implied covenant of good faith and fair dealing by unreasonably terminating Dr. Perry for his refusal to authorize a transfer of the Jacksonville patient to Baptist Medical Center.

Baptist filed a motion to dismiss pursuant to Ark. R. Civ. P. 12(b)(6), asserting that Dr. Perry's first amended complaint fails to state facts upon which relief can be granted. Baptist argued that Dr. Perry is foreclosed from suing for breach of contract because he is not a party to the contract. Baptist recognized that Dr. Perry could be an incidental beneficiary to the contract, but contended that the first amended complaint fails to factually support Dr. Perry's conclusion that he is an intended third-party beneficiary of the contract who is entitled to sue for breach of the contract. Following a hearing on the matter, the circuit court concluded that Dr. Perry "has failed to state in concise language facts showing that he is entitled to relief, as required by Ark. R. Civ. P. 8(a)(1)." Accordingly, the circuit court granted Baptist's Rule 12(b)(6) motion and dismissed Dr. Perry's first amended complaint without prejudice.

Dr. Perry's first amended complaint alleges a cause of action for breach of contract as a third-party beneficiary. Generally, in order to state a cause of action for breach of contract the complaint need only assert the existence of a valid and enforceable contract between the plaintiff and defendant, the obligation of defendant thereunder, a violation by the defendant, and damages resulting to plaintiff from the breach. Rabalaias v. Barnett, 284 Ark. 527, 683 S.W.2d 919 (1985) (citing Allied Chem. Corp. v. Van Buren Sch. Dist., 264 Ark. 810, 575 S.W.2d 445 (1979)). The issue here stems from the first requirement — the existence of a valid and enforceable contract between the plaintiff and defendant. It is undisputed that Dr. Perry is not a party to the Services Agreement executed by ATS and Baptist. Instead, his standing as a plaintiff hinges on his status as a third-party beneficiary.

In Arkansas, a party may recover for damages from breach of contract when that party is a third-party beneficiary to the contract. Stilley v. James, 347 Ark. 74, 60 S.W.3d 410 (2001). Dr. Perry's first amended complaint clearly alleges that he is a third-party beneficiary to the Services Agreement. Paragraphs 32 and 38 state:

Baptist and [ATS] clearly intended to benefit plaintiff and other [ATS] Physicians under the services agreement, and plaintiff is therefore an intended third-party beneficiary under the services agreement.

A contract is actionable by a third party when there is substantial evidence of a clear intention to benefit that third party. Little Rock Wastewater Util. v. Larry Moyer Trucking, 321 Ark. 303, 902 S.W.2d 760 (1995). It is not necessary that the person be named in the contract if he is a member of a class of persons sufficiently described or designated in the contract. Id. Generally, the status of a third-...