QHG of Springdale, Inc. v. Archer

• Decision Date: 09 December 2009
• Docket Number: No. CA 07–1115.,CA 07–1115.
• Citation: 2009 Ark. App. 692,373 S.W.3d 318
• Parties: QHG OF SPRINGDALE, INC., Appellant v. Ernest ARCHER, M.D., Appellee.
• Court: Arkansas Court of Appeals

2009 Ark. App. 692

373 S.W.3d 318

QHG OF SPRINGDALE, INC., Appellant

v.Ernest ARCHER, M.D., Appellee.

No. CA 07–1115.

Court of Appeals of Arkansas.

Oct. 21, 2009.

Rehearing Denied Dec. 9, 2009.

Littler Mendelson, P.C., Fayetteville, by: Eva C. Madison, for appellant.

Law Office of Tina M. Damron, PLLC, Rogers, by: Tina M. Damron, for appellee.

D.P. MARSHALL JR., Judge.

This [Ark. App. 1]case illustrates the proverb: When a piece of paper blows into a law court, it may take a yoke of oxen to drag it out. The main piece of paper in this case is the 2002 employment contract between Dr. Ernest Archer, an OB/GYN, and his hospital-employer, QHG of Springdale.

I. Statement of Facts

Dr. Archer and QHG entered into their first employment contract in 2000. The parties operated under this agreement for two years. In October 2002, after much negotiation, the parties rescinded the first agreement and entered into a new one. The new [Ark. App. 2]agreement was a detailed five-year contract. This lawsuit turns on this second agreement.

Over time, Dr. Archer became dissatisfied with several aspects of his job. He claimed that QHG repeatedly denied his time-off requests for vacation and continuing medical education and failed to provide adequate personnel and equipment. Dr. Archer's chief complaint was QHG's failure to provide rotating call coverage. With the exception of a few weeks here and there, Dr. Archer was on call twenty-four hours a day, seven days a week for more than two years. In January 2004, exercising an option available to both parties under the contract, QHG terminated the employment relationship without cause upon 180–days' notice. The hospital sent Dr. Archer a letter, explaining that his termination would be effective in July 2004. Dr. Archer, however, resigned his medical staff privileges in May 2004 because he could no longer operate safely given problems with his hands. The next day, QHG terminated Dr. Archer for cause.

Dr. Archer then sued QHG. He alleged, among other things, that QHG broke the 2002 employment contract in several ways and that the hospital was unjustly enriched by him providing non-stop call coverage. These two claims were the core of the case at trial. The circuit court granted QHG's directed-verdict motion on the unjust-enrichment claim. Dr. Archer's breach-of-contract claim went to the jury, which found that QHG had violated the 2002 employment agreement and awarded Dr. Archer $387,500.00. QHG appeals the jury's award, and Dr. Archer cross-appeals the dismissal of his unjust-enrichment claim. At oral argument before this court, Dr. Archer said his cross-appeal was conditional on the outcome [Ark. App. 3]of QHG's appeal: if we affirm on direct appeal, then he abandons his cross-appeal.

II. Construing the Contract

QHG argues first that the 2002 agreement permitted termination of Dr. Archer's employment for cause when he resigned his medical staff privileges. According to the hospital, it did not breach the agreement by terminating him and was therefore entitled to judgment as a matter of law. But this argument ignores the substantial evidence supporting the jury's conclusion that QHG made the first material breach.

Though Dr. Archer alleged that QHG committed several breaches, on appeal the parties concentrate on QHG's alleged failure to provide rotating call coverage. The parties' 2002 agreement contained this provision: “[Dr. Archer] shall provide on-call coverage on a rotating basis and shall be on call as shall be determined from time to time by agreement between [QHG] and [Dr. Archer].” We reject QHG's argument that the agreement imposed no obligation on the hospital to provide rotating call. ‘No rotation’ is not having call on a rotating basis. The premise of this provision is that there would be some rotation in Dr. Archer's call schedule.

The precise meaning of having call on a “rotating basis” was and is an open question—one that must be answered by the jury on Dr. Archer's unjust-enrichment claim, as we hold in resolving his cross-appeal. But this is not like the Cagin case, which QHG invokes, where the parties' contract was silent about rotating call. Cagin v. McFarland Clinic, P.C., 456 F.3d 903, 905 (8th Cir.2006). QHG's Policy # 201 also undercuts the hospital's [Ark. App. 4]reading of this provision. The hospital's policy could not be clearer: “No physician is required to be on call 24/7.”

The evidence presented at trial showed that Dr. Archer was on call around the clock. He began complaining to the hospital administration about this situation as early as May 2001. He testified in detail about his repeated requests for rotating call coverage, the hospital's repeated failures to provide rotation, the hospital's denials of his requests for vacation and continuing-education absences, and the effect that the tremendous workload had on him.

The jury returned a general verdict in Dr. Archer's favor. We therefore cannot know what breach or breaches it found. Nonetheless, the damage award can only mean that QHG was in material breach of the 2002 contract. Taylor v. George, 92 Ark.App. 264, 272–73, 212 S.W.3d 17, 23–24 (2005). QHG's breach thus excused Dr. Archer's continued performance under the contract. Continental Carbonic Products, Inc. v. Cohen, 96 Ark.App. 305, 310–11, 241 S.W.3d 296, 301 (2006).

QHG argues that, in the face of any material breach, Dr. Archer had two options: he could seek affirmance remedies (such as damages) or disaffirmance remedies (such as rescission and restitution). Because Dr. Archer continued to perform under the contract even after QHG's breach, the hospital's argument continues, his later resignation of medical privileges was a breach that allowed QHG to terminate the contract immediately. According to the hospital, Dr. Archer could not continue performing his contractual duties, accept the benefits of the contract, and then, relying on QHG's earlier material breach, refuse to perform.

At [Ark. App. 5]trial, however, the parties agreed to instruct the jury with AMI Civil 2427. The court's instruction told the jury this: “A material breach is a failure to perform an essential term or condition that substantially defeats the purpose of the contract for the other party. A material breach excuses the performance of the other party and allows that party to sue for damages on the whole contract.” QHG did not seek, proffer, or mention AMI Civil 2437, which is the applicable instruction “when the defendant contends that the plaintiff waived his right to claim a breach of contract by acceptance of benefits.” And this kind of alleged waiver was a disputed question of fact for the jury in this case. Stephens v. West Pontiac–GMC, Inc., 7 Ark.App. 275, 278, 647 S.W.2d 492, 493–94 (1983). QHG thus waived its waiver-of-breach argument.

Next, damages on the contract. In order to fix the appropriate measure of damages for Dr. Archer under the parties' agreement, we must first resolve the alleged tension between the contract's salary and termination provisions. Addendum # 2 to the contract states that Dr. Archer's annual salary for the first two years of the agreement would be $300,000.00. Handwritten out to the side is the following statement: “The first 18 months of this agreement are guaranteed.” QHG and Dr. Archer agreed that the handwritten statement was part of their contract. Paragraph 3.2 of the contract allows either party to terminate the contract “without cause, at any time” upon 180–days' written notice. Dr. Archer says that, taken together, these two provisions are ambiguous. He argues further that the two provisions were meant to run consecutively. Here Dr. Archer relies on parol evidence in the [Ark. App. 6]form of a pre-contract letter from QHG's administrator. Dr. Archer concludes that QHG could not give him notice of a termination without cause until the eighteen-month period had run.

Whether the parties' contract is ambiguous is a question of law. Western World Ins. Co. v. Branch, 332 Ark. 427, 430, 965 S.W.2d 760, 761 (1998). We see no ambiguity, either patent or latent. These two provisions are reconcilable. QHG contends, and we agree, that the eighteen-month salary guarantee was essentially a severance package. If QHG had decided to terminate the agreement with or without cause before the eighteen months had run, then Dr. Archer would still be paid for a full eighteen months. If the termination was without cause, then the timing of the notice determined whether the 180–day period ran consecutively or concurrently or both. To read the two provisions any other way would effectively strike the “without cause, at any time” termination provision—a provision available to both QHG and Dr. Archer—from the parties' agreement. “A construction which neutralizes any provision of a contract should never be adopted if the contract can be construed to give effect to all provisions.” Continental Cas. Co. v. Davidson, 250 Ark. 35, 41, 463 S.W.2d 652, 655 (1971) (citation omitted). We therefore reject Dr. Archer's arguments about ambiguity.

QHG also argues that, even if it was in breach, then the jury's award of $387,500.00 is adrift from the facts and the law and requires a new trial or remittitur. We agree. Generally, “damages recoverable for breach of contract are those damages that would place [Ark. App. 7]the injured party in the same position as if the contract had not been breached.” Deck House, Inc. v. Link, 98 Ark.App. 17, 25, 249 S.W.3d 817, 824–25 (2007). Further, “[w]here a contract is terminable at any time on notice and it is terminated without notice, the damages which the aggrieved party may recover are limited to the notice period.” 25 C.J.S. Damages § 110 (2009); see also Knight v. Interco Inc., 873 F.2d 1125, 1128–29 (8th Cir.1989) (applying Arkansas law); 11 Samuel Williston, A Treatise on the Law of Contracts § 1359, at 311 (Walter H.E. Jaeger ed., 3d ed.1968). Here, the parties capped the damages recoverable on their...