Sax v. DiPrete

• Decision Date: 06 August 2009
• Docket Number: Civil Action No. 08-11662-RGS.
• Citation: 639 F.Supp.2d 165
• Parties: Eric J. SAX v. Daniel A. DiPRETE, The Imaging Institute, and TII Radiologists, Inc.
• Court: U.S. District Court — District of Massachusetts

639 F.Supp.2d 165

Eric J. SAX v. Daniel A. DiPRETE, The Imaging Institute, and TII Radiologists, Inc.

Civil Action No. 08-11662-RGS.

United States District Court, D. Massachusetts.

August 6, 2009.

COPYRIGHT MATERIAL OMITTED

Michael B. Cosentino, William A. Devasher, Jr., Molly Cochran, Seegel, Lipshutz & Wilchins P.C., Wellesley, MA, for Eric J. Sax.

Joseph Avanzato, Adam M. Ramos, Adler Pollock & Sheehan P.C., Providence, RI, Philip Y. Brown, Adler, Pollock & Sheehan, P.C., Boston, MA, for Daniel A. DiPrete, The Imaging Institute, and TII Radiologists, Inc.

MEMORANDUM AND ORDER ON MOTION FOR JUDGMENT ON THE PLEADINGS

STEARNS, District Judge.

On September 29, 2008, Dr. Eric J. Sax sued defendants Daniel A. DiPrete, The Imaging Institute, Inc. (TII), and TII Radiologists, Inc. (TIIR), alleging breach of contract (Count I), breach of the covenant of good faith and fair dealing (Count II), and fraud in the inducement (Count III). On February 2, 2009, defendants moved for judgment on the pleadings. The court heard oral argument on July 27, 2009.

FACTUAL BACKGROUND

The facts viewed in the light most favorable to Sax as the non-moving party are as follows. Dr. Sax has been licensed to practice medicine in Massachusetts since July of 1990. He became a licensed radiologist in July of 1992. He is well regarded in the field of radiology, and is currently a member of the Executive Committee of the Massachusetts Radiological Society.

In April of 2000, Sax joined the radiology department of Newton-Wellesley Hospital (Newton-Wellesley), a Tufts Medical School (Tufts) teaching hospital affiliated with the Partners Health Care System. At Newton-Wellesley, Sax served as Chief of Nuclear Medicine and as Medical Director of the PET/CT Center. He also taught at Tufts as a Clinical Instructor of Radiology.

In June of 2005, Sax received an unsolicited telephone call from an A. J. Rachele¹, who identified himself as an executive recruiter retained by a thriving technical imaging and professional interpretation practice based in Rhode Island (Practice). Rachele told Sax that the Practice was looking to partner with a prominent radiologist. Sax initially rebuffed Rachele's overtures, stating that he was not interested. Rachele persisted. During conversations that lasted into July of 2005, Rachele told Sax that he would not only be offered a share of the Practice, but also the "technical profits" derived from the imaging services. Rachele promised Sax a "nominal buy-in with little risk." Sax agreed to speak with the owner of the Practice, defendant Daniel DiPrete.

During the course of three telephone calls to Sax and one exchange of emails, DiPrete explained the offer in more detail. Sax expressed concern that the offer entailed a substantial personal financial risk. Sax noted that the proposed salary was $150,000 less than what he was currently earning at Newton-Wellesley. DiPrete assured Sax that he would more than make up the difference within a year of becoming a partner. DiPrete acknowledged that Sax would be giving up a secure position and an easy commute, but represented that the Practice was successfully established and thriving. DiPrete also stated that he was currently the sole shareholder in the Practice. During the discussions, DiPrete proposed that the partnership buy-in price be determined according to a "reasonable" formula: $75,000 for each $600,000 of net income, paid out as a percentage of Sax's share of the Practice. DiPrete iterated these representations during an in-person meeting. Finally, in a follow-up telephone call, DiPrete stated that Sax would be given the opportunity to buy into the Practice as an equal shareholder if he were to first enter the Practice as an employee and perform at a satisfactory level.

In an email discussing a proposed employment contract, Sax requested that the agreement state that he would be given an opportunity to purchase a share of the Practice equal to what the (then) other partners owned,² and that the buy-in price be stipulated as $75,000 (to be paid over a defined time). DiPrete countered that Sax would be "offered. . . an equal percentage basis as other shareholders, with proportionate compensation." He explained that if the buy-in price was frozen at $75,000, Sax's income as a shareholder would be limited to $600,000. DiPrete stated that if the Practice's earnings grew more quickly than expected, the buy-in price would be higher, but still very "reasonable." As to the term of the buy-in, DiPrete proposed three years (if the buy-in was $75,000), or between three and five years if the price was higher.

Relying on DiPrete's representations, Sax signed an employment agreement with TII dated July 27, 2005, which included the following provision (Section 12):

After Twelve (12) months of employment, the Corporation shall notify the Doctor as to whether the Doctor shall be offered partnership upon completion of the Term, on an equal percentage basis as other shareholders, with proportionate compensation.

The agreement also contained an integration clause: "This Agreement supersedes and replaces any and all prior agreements between the parties hereto."

Sax began employment at the Practice in January of 2006. All of Sax's employment-related communications, including payroll checks and reimbursement checks for business expenses, were signed by either TII or TIIR. Through the course of Sax's employment, DiPrete expressed complete satisfaction with his services. At the completion of his first year of employment, Sax received a letter from DiPrete indicating that he would be offered a partnership in January, 2008 (at the end of his second year of employment). Sax remained with the Practice in anticipation of becoming a partner.

During the course of Sax's employment, the Practice experienced a rapid growth in income. In December of 2007, when Sax sought to exercise the buy-in, DiPrete suggested a buy-in price that was higher than what had been discussed (or that Sax expected).³ Sax then asked to review the Practice's financial information, which Di-Prete provided on the condition that Sax sign a confidentiality agreement. Sax found the information incomplete and unhelpful. Sax alleges that an equal share of the Practice as of January 2008 was worth at least $4,000,000. Sax did not agree to DiPrete's terms and stated that he would be leaving the Practice in January, 2008 upon the expiration of his existing contract. DiPrete sent Sax a form release dated January 15, 2008. Sax was offered a payment in exchange for a release of any claims against DiPrete and TII. Sax refused to sign the release and left the Practice.

This lawsuit followed. Among other relief, Sax seeks to hold DiPrete, TII, and TIIR jointly and severally liable for any money damages that he might be awarded.

DISCUSSION

Where the well-pleaded facts permit a court to infer only the mere possibility of misconduct, a complaint has alleged, but it has not shown, that the plaintiff is entitled to relief. Ashcroft v. Iqbal, 556 U.S. ____, 129 S.Ct. 1937, 1951-1952, 173 L.Ed.2d 868 (2009). A motion to dismiss brought after a complaint is answered is treated as a motion for judgment on the pleadings. Fed.R.Civ.P. 12(c) permits a party to move for judgment on the pleadings at any time "[a]fter the pleadings are closed," as long as the motion does not delay the trial. A Rule 12(c) motion differs from a Rule 12(b)(6) motion in that it implicates the pleadings as a whole. "In the archetypical case, the fate of such a motion will depend upon whether the pleadings, taken as a whole, reveal any potential dispute about one or more of the material facts." Gulf Coast Bank & Trust Co. v. Reder, 355 F.3d 35, 38 (1st Cir.2004). In reviewing a motion under Rule 12(c), as in reviewing a Rule 12(b)(6) motion to dismiss, a court may consider documents the authenticity of which are not disputed, documents that are central to a plaintiff's claim, and documents that are sufficiently referred to in the complaint itself. See Curran v. Cousins, 509 F.3d 36, 44 (1st Cir.2007). If the motion introduces materials outside the record that is accepted by the court, the Rule 56 standard applies thereby "erect[ing] a hurdle for the nonmovant that is far more difficult to clear than the relatively modest hurdle posed by Rule 12(c) simpliciter." Reder, 355 F.3d at 38.

In deciding a motion for judgment on the pleadings (as with brevis motions generally), a federal court applies the choice-of-law framework of the forum state in reviewing state-law claims. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). "A federal court sitting in diversity need not [, however,] make a finding regarding which state's law is to be applied where the case's resolution would be identical under either state's law." Fratus v. Republic W. Ins. Co., 147 F.3d 25, 28 (1st Cir.1998).

The contractual dispute at the heart of this motion for judgment on the pleadings rises or falls on the parole evidence rule. This rule limits proof of an oral agreement made prior to or contemporaneous with a written contract depending on how fully the contract is integrated; the extrinsic evidence rule is related to the parole evidence rule, but is not identical. See Sunoco, Inc. v. Makol, 372 F.3d 31, 36 n. 1 (1st Cir.2004). The parole evidence rule is applied congruently by the courts of Rhode Island and Massachusetts. "[T]he parol-evidence rule bars the use of any previous or contemporaneous oral statements that attempt to modify an integrated written agreement." Nat'l Refrigeration, Inc. v. Standen Contracting Co., Inc., 942 A.2d 968, 972 (R.I.2008) (internal citations omitted). "Evidence of prior or contemporaneous oral agreements cannot be admitted to vary or modify the terms of an unambiguous written contract." Fairfield 274-278 Clarendon Trust v. Dwek, 970 F.2d 990, 993 (1st Cir.1992), citing New England Fin. Res., Inc. v. Coulouras, 30...